Q: I am current on my 8-year-old FHA mortgage, which is with one of the big banks. I want to refinance to take advantage of lower interest rates. When I have called my lender, they told me it would cost me $4,000 to $6,000 in closing costs to refinance.
What I want is a streamline refinance that I keep hearing about – you know, the ones that cost about $400 bucks and simply lower the interest on the current loan.
How can I find one?
A: If you have an FHA loan, you should call back your lender and tell them you want to do an FHA streamline refinance, not a full refinance. Ask them what the process is for a streamline FHA refinance (it’s important you tell them in those words), how much it will cost and how long it will take.
Hopefully, the customer service representative will understand what you’re asking for and be a little more helpful. If not, you might wish to hang up and call again until you find someone who can help you.
The benefit of this program is that the terms of your loan don’t change. All that changes is the interest rate. The rest of your loan stays the same. Another benefit is that the lender does not need to pull an appraisal of your property, which is very helpful when property prices are falling.
Unfortunately, if you have a conventional loan, you will not be able to do a streamline refinance and will have to evaluate whether it is worthwhile to do a full refinance. Given that mortgage interest rates have fallen again to near all-time lows, the answer might be yes.
One last thought: Even if you can do a streamline refinance, you might want to consider other options as interest rates are so low. You are eight years into your loan and you might benefit from a 15-year loan. Your payments might be lower than what you have now and you’ll pay off your loan sooner than with a streamline refinance. There are some lenders out there that can offer you a refinance package where you might not pay much in fees – and they won’t add their fees the your loan balance either.
So shop around and see what deal might be the best one for you given your credit history, your credit score, the value of your home and your loan balance.