A mortgage is generally the largest debt most homeowners have to manage.  It’s a good idea to give your personal real estate finance portfolio a check-up at least once a year.

Since there are many reasons a homeowner may choose to refinance, we’ll take a look at the four most common.

1.  Mortgage Rates Drop:

Typically, the most common reason that homeowners refinance their mortgage is to secure a lower interest rate. Interest rate and loan amount determines the total cost that a borrower will pay. The lower the interest rate, the less the overall cost will be. Interest is calculated on a daily basis and usually paid back to the lender on a monthly basis.

2.  Lower Payments:

Lowering a mortgage payment can be achieved by lowering the mortgage rate, lengthening the loan term, combining two or more loans or removing mortgage insurance.

3.  New Mortgage Program:

Refinancing an Adjustable Rate Mortgage (ARM) to a new Fixed Rate Mortgage (FRM), combining a first and second mortgage or paying off a balloon loan are three possible reasons to explore a refinance.

4.  Debt Consolidation:

If there is sufficient equity, sometimes paying off consumer debt by combining all debts into one lower monthly mortgage payment can significantly reduce the short-term deficits in a budget.  However, it’s important to keep in mind the total cost of that debt by adding it into a 30 year mortgage payment.

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Frequently Asked Refinance Questions:

Q:  Do I have to refinance with my current mortgage company?

No, you may choose any company to refinance your mortgage since the new loan will replace the existing mortgage.

Q:  Is it easier to refinance with my current mortgage company?

It is possible your current mortgage company may require less documentation, but this could add additional cost or a higher interest rate. Do your homework and shop around to make sure you’re getting the best deal.

Q:  Will I automatically qualify if I’ve never made any late payments?

No, you will have to qualify for your new refinance. However, certain programs will allow for reduced documentation like a FHA to FHA Streamline Refinance.

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Related Article – Refinance Process:

• Refinance Process Overview
• Mortgage Approval Process
• Calculating The Net Benefit Of A Refinance
• Should I Refinance Or Get A Home Equity Loan To Make Improvements?
• What Do Appraisers Look For When Determining A Property’s Value?
• Understanding The Difference Between Appraised Value vs Neighborhood Listing Comps
• Five Myths About Home Values
  

Related Posts

• Can You Qualify for Refinancing?
• What’s The Difference Between Interest Rate and Annual Percentage Rate (APR)?
• Top Five Market Factors That Influence Mortgage Rates
• Financing On A Foreclosure, Short Sale or New Construction

In April, the details of the Making Home Affordable plan were released and it was announced that there was a “refinance” portion to the plan and a “loan modification” portion to the plan.

The rules for refinancing depended on whether your loan was owned by Fannie Mae or Freddie Mac and we talked about how to tell if your loan was owned by Fannie Mae or Freddie Mac (see below).

At that point in time, if your loan was owned by Fannie Mae, you could use whatever lender you wanted to refinance  your home under the Making Home Affordable plan (also known as the Obama Refinance). If your current mortgage was owned by Freddie Mac, the rules were that you had to use your current lender to refinance.

Not anymore.

Freddie Mac has announced that you can now refinance under the Making Home Affordable guidelines with whoever you want, you no longer have to go through the lender that you are currently with.

Highlights of the announcement:

1. You can work with your existing mortgage servicer to refinance your mortgage – and one benefit of working directly with your lender is that they will not have to re-underwrite your file.
2. If you choose to work with a different lender, they will be required to re-underwrite your file.
3. You can now roll in up to the lesser of 4 percent of the new refinance mortgage amount or $5,000 of closing costs, financing costs and prepaids/escrows.

According to Freddie Mac Executive Vice President Don Bisenius:

“We are responding to consumers’ desires to have more refinancing options. As an added benefit, we are expanding the program and providing greater flexibility in financing closing costs. Freddie Mac is committed to doing everything we can to bring the benefits of the Administration’s Making Home Affordable program to as many borrowers as possible.”

Does this mean that Freddie Mac has made it easy to use whatever lender you want when trying to refinance your home under the Making Home Affordable plan?

Not really.

But at least it is now possible.

Hurry before mortgage rates go up!

Related Information:

Find out if your loan is owned by Fannie Mae.

Find out if your loan is owned by Freddie Mac.

Related Posts

• Should You Refinance? 4 Possible Reasons Why It May Make Sense
• Making Home Affordable Plan

Earlier today, the details were released about the “Making Home Affordable” plan outlined by the Obama administration.

When this plan was first announced by President Obama here in Mesa a few weeks ago, my first reaction was “let’s wait for the details“.

My reaction now the “details have been released”?

I don’t know.

Really.

I really don’t have an opinion on whether or not the plan will actually help the number of homeowners as claimed by the media (9 million) – because after all, what most people really want to know is “will the plan help me in my situation” as in… “what’s in it for me“?

And each situation is individual, so be sure to speak with as many people as you can about your options. Real Estate Agents, Loan Officers, Hope Now, Loan Modification Companies, Loan Modification Attorneys – speak with all of these people if you are having trouble making your mortgage payment.

And it is entirely probable that they will all tell you different information — and hopefully with the sum of the pieces, you will be able to paint the picture of what is best for you in your situation.

Ok, sorry to ramble a little. Here is more information about the Making Home Affordable plan – be sure to read through it if you are wondering if the plan will help you in your situation. As always, let me know if you have specific questions.

Making Home Affordable — More Information From FinancialStability.gov:

Borrower Information: Making Home Affordable Refinance and Modification Options

Fact Sheet

Summary of Guidelines

Modification Program Guidelines

Counselor Q&A

Related Posts

• Should You Refinance? 4 Possible Reasons Why It May Make Sense
• Making Home Affordable Refinance: Freddie Mac Changes Rules