At Boulevard Mortgage we always review the refinance costs along with the anticipated savings and your homeownership goals to determine if taking out a new mortgage loan makes sense. We do a thorough evaluation upfront so you know the costs and benefits before you decide to move forward.
Types of Refinance
FHA Streamline: a reduced documentation loan for existing FHA borrowers. No credit check, no income verification and no appraisal. We will have to check your mortgage payment history and since you can only refinance the existing loan balance you may need to pay some costs in cash at closing.
FHA Full Doc: This is a regular FHA loan with income verification and an appraisal. You can convert from an existing conventional loan and get cash out up to 85% of the value of the home. Closing costs can be included in the loan amount.
VA IRRL Loan: This is a streamline VA loan with no income verification or appraisal needed. It is for existing VA loans only.
HARP refinance: This is a special refinance program for "underwater" borrowers who have been current on their mortgage for the past 12 months and who have less than 20% equity. The existing loan must have originated on or before May 31st 2009 and be owned by Freddie Mac or Fannie Mae. Generally, there is no LTV (Loan to Value) restriction if you are eligible for the program and you won't have to get PMI if your existing loan doesn't have it now.
ZeroPMI: Refinance with little to no equity and still eliminate PMI. Convert from a high MI cost FHA loan. You can generally finance up to 101% of the value of the home to pay off existing mortgage and closing costs. No Cash out allowed.
Standard Refi: Documentation and appraisal required. Cash out up to 80% of the value of the home or up to 95% if just paying existing balance and closing costs.
Reasons to Refinance
People refinance for several different reasons, including but not limited to:
A Lower Monthly Payment. This is the most common reason people refinance. To decrease the overall payment and interest rate, it may make sense to pay a point or two, if you plan on living in your home for the next several years. In the long run, the cost of the refinance will be paid for by the monthly savings. On the other hand, if you are planning to move in the near future, you may not be in the home long enough to recover the costs associated with it. Therefore, it is important to calculate a break-even point, which will help determine whether or not the refinance would be a sensible option.
Convert to a Fixed Rate Mortgage from an Adjustable Rate Mortgage. If you took out an Adjustable Rate Mortgage (ARM) in order to keep your intial payments low, it could make sense for you to convert to a fixed rate and lock in your payments for the duration of your loan.
Reduce the loan term. You might be able to reduce the term while keeping your payments affordable and saving many years worth of interest.
Eliminate Private Mortgage Insurance (PMI). Low or zero down payment allow buyers to purchase a home with less than 20% down but they usually require private mortgage insurance. PMI is designed to protect lenders from borrowers defaulting on the loan. As the balance on a home decreases, and the value of the home increases, borrowers may be able to cancel their PMI by refinancing into a new mortgage loan. With our ZeroPMI loan you might be able to eliminate the PMI or FHA MIP even without having 20% equity.
Get cash out. Increased home value gives you the opportunity to put some of your equity to good use, whether it goes towards purchasing a vacation property, buying a new car, paying your child's tuition, home improvements, paying off credit cards, or simply taking a much needed vacation. Cash-out mortgage refinance transactions can be the best way to finance big purchase items.
Avoid Balloon Payments. Balloon programs, like ARMs are a good idea for lowering initial monthly payments and rates. However, at the end of the fixed rate term, which is usually 5 or 7 years, if you still own the property, the entire mortgage balance would be due. If you have a balloon program, you might be able to switch over into a new fixed rate or adjustable rate mortgage and avoid having to pay the lump sum due at the end of the balloon term.