Different Mortgage Refinance Options



Mortgage refinance is now a hot venture as mortgage rates reached another record low.

Latest data from Bankrate showed the 30-year fixed-rate mortgage (FRM) is now at 4.02 percent, down from the 4.11 percent in April. The 15-year fixed-rate is now at 3.2 percent while the adjustable-rate mortgage (ARM) is at 2.99 percent.

Whereas some homeowners are still mulling a jump on mortgage refinance wagon, others are already cozy, figuring out how to maximize benefits of these low rates.

For those who are still in the planning stage, get yourselves informed about the different mortgage refinance options to make the best out of the current development.

The first option for a borrower is FRM. According to Freddie Mac Quarterly Product Transition Report, a whopping 95 percent of refinanced loans in the first quarter of 2012 are under this option.

In FRM, the principal and interest of a loan is not affected by changes in mortgage rates. The borrower who elects for FRM will have the same monthly payment from the first up to the last installment of the home loan. The borrower also decides if a loan will be paid in 15, 20, or 30-year arrangement.

The second option is ARM. In ARM, a borrower enjoys a certain level of flexibility. In the beginning of home loan tenure, a borrower’s interest rate is low and fixed. It then can be reset periodically. ARM works best for those who have equity in their property.

The third option is Home Affordable Modification Program (HAMP). HAMP is the best option for homeowners who are struggling with their monthly mortgage payment and with properties having a market value below the existing loans. Under HAMP, loan payment scheme is modified and tailored to the financial capabilities of the borrower. To qualify, the property being applied for HAMP should be the borrower’s place of residence. Lender will also verify if existing monthly mortgage exceeds 31 percent of borrower’s gross income.

The fourth option is Home Affordable Refinance Program (HARP). HARP is for those who are not delinquent with mortgage payments, but could not secure refinancing because of property’s depreciated value. To qualify, a borrower should have not missed any payment in the last 12 months and the debt involved is 105 to 125 percent of what the property being applied for HARP is worth.

FRM, HAMP and HARP are Federal Housing Administration (FHA)-backed programs.

Other FHA-backed programs are cash-out and streamline refinance. Cash-out is for those with property having increased market value while streamline is geared towards lowering monthly payments or interest rates.

For an accurate interest rate, get help from mortgage loan professionals, banks and other financial establishments.



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