You might be able to lower your mortgage interest rate with an FHA loan.
Q: I was listening to your radio show on WSB Radio this past Sunday. The caller had a mortgage with one of the big banks and he wanted to get his interest rate lowered. He stated he wasn’t behind in his payments but wanted more cashflow for the household.
My rate currently is 5.25 percent and I am current on my mortgage. Can you give me some direction on this?You stated that if you had an FHA loan there was a program he could use to refinance. I missed what that program was called. I have an FHA loan with the same bank and also want to lower my interest rate.
A: The Federal Housing Administration (FHA), which is part of the Department of Housing and Urban Development (HUD) has required its lenders to offer FHA borrowers a streamline refinance. There is no appraisal required for this refinance, so whether you have any or enough equity in the property shouldn’t be a problem.
Because this is a streamline refinance, there should be very few costs. While the lender may be lowering the lowering the interest rate on the mortgage, the lender essentially gives you a new loan. The costs of the streamline refinance may be covered by giving you a slightly higher mortgage interest rate or you may end up adding some of those expenses — subject to certain limitations — to the amount you owe on the loan.
Pick up the phone and call your lender today. My real estate advice to you is if you can lower your interest rate and recover your closing costs in a couple of months through your lower monthly mortgage payments, you will be better off in the long run. But, don’t just go our and refinance your mortgage to get a lower rate, you still have to determine your closing costs and the time remaining on your current mortgage loan to see if refinancing is right for you.
Regarding the response printed in the Oregonian yesterday (Sunday, Nov. 20) your response to the above Streamline refinance question differs from the response on your website, the Oregonian states (last part): Because this is a streamline refinance, cost should be minimal. All the lender is doing is lowering the interest rate on the mortgage. The paperwork and other details shouldn’t change. So, if you have 25 years left to repay your loan, you’ll still have 25 years – you’ll just pay interest at a lower rate for those years. Pick up the phone and call your lender today.
Well I called BOA first thing this morning and they told me this is not possible! Is it just BOA or was this a miss print in the newspaper?
Kristine,
Thanks for your comment. FHA loans have specific requirements and our story should have said that when you streamline refinance your FHA loan, you end up with a new 30 year term loan. Also, FHA fees and other costs may not make it worthwhile refinancing unless the drop in the interest rate is rather large. For that reason, we always suggest talking to your mortgage lender or broker. However, with an FHA streamline refinance, you can decide to refinance into a shorter term loan under certain circumstances. And the reason it’s limited is that you are restricted as to how much your loan payment can increase in order to qualify for the streamline refinance.