Refinancing their FHA home mortgage is something that most homeowners consider doing at some point during the years in which they are making mortgage payments. But like the original mortgage, an FHA home refinance loan is a large financial decision that requires careful consideration. If you are currently considering your mortgage situation and wondering whether refinancing is a good plan for your family's future, here is some advice to help you make the best decision for your situation.
The pros and cons
The act of refinancing your home means that you will effectively be paying off the original mortgage and replacing it with a new one. Doing this can be a very positive step in some situations. Refinancing your home loan can offer homeowners the chance to:
- lower mortgage interest rates to make monthly payments easier to afford
- convert to a different type of home loan, for example from an adjustable to a fixed rate loan
- remove equity to meet a financial need or purchase, such as debt consolidation or paying for home renovations or a medical bill
While all of these reasons can make refinancing an excellent choice, homeowners must also consider the actual cost to refinance, which may include a new appraisal, updating the title search, and any application and loan fees that may apply.
The FHA Streamline Refinance
Refinancing an existing FHA home loan with the FHA Streamline option can be more time and cost-effective than other refinancing options. To qualify for the FHA Streamline refinancing option, homeowners must:
- have owned the property for six or more months and have been current on mortgage payments for a full year
- make application with an FHA-approved lender
- must be willing to either pay closing costs up front or be able to add them into the loan without exceeding the original appraisal amount
Because no appraisal is needed for this loan type, the costs for this loan and the wait time for processing are typically less than many other refinance options.
The FHA Streamline 203(k)
In addition to the basic FHA Streamline offering, homeowners who need to make repairs or renovations to their home may want to refinance using the FHA Streamline 203(k) loan. This option can be used for projects for which the cost will be between $5,000 and $35,000, such as adding insulation or thermal windows to make the home more efficient.
To learn more about refinancing any FHA loan, contact a reputable, FHA-approved lender or mortgage broker in your area.Share