There are currently many ways for a mortgage lender to restructure a FHA loan and refinance it through a FHA Streamline Refinance. Typically, this type of loan is more common in extremely low interest rate environments as there are still fee’s and expenses associated with the new mortgage. When interest rates fall low enough, lenders can absorb some, many or all of the costs associated with the new mortgage while still being able to offer the borrower a lower interest rate and payment.
One word of caution if you are considering a FHA streamline refinance, review your numbers. Consider how many months or years you have paid into your current loan. In addition when considering monthly savings, do you have a plan on what to do with the savings? A family that will be saving $300 per month could either invest or save it on a monthly basis or pay it towards the principle to accelerate the payoff and offset an increase in term.
If you have an existing FHA loan, you paid an up front mortgage insurance premium, this is partially refunded at the payoff of your current loan and a new mortgage insurance premium is added to the new mortgage. The up front premium will decrease after October 4th, but will increase the monthly mortgage insurance costs.
What does this mean? The window of opportunity to get locked in to the current FHA monthly expense structure will close in a month. The changes are real and it is unclear how long interest rates will remain low in this volatile economy.
We are seeing the lowest interest rates in the last 50+ years, the beauty of a 30 year fixed mortgage, is that you are guaranteed your rate and payment for 30 years. When you lock in the lowest rates in 50 years for 30 years, I am sure that external pressures like inflation will make the mortgage even more affordable along the way.
To put it into perspective, a 30 year fixed mortgage 30 years ago would have been around 13% interest, which is $2,250 a month for $200,000. Today, a 4.25% fixed rate mortgage would cost $1,001 per month. Or on the flip Side the buying power of $1,000 a month is $200,000, in 1980 @ 13% it would have been $90,000.
See how interest rate makes a difference?
At the end of the day, owning real estate is not easy or effortless, but there are rewards. You get to be your own landlord, there are attractive tax benefits, by paying off principle in your payment there is forced savings and you can bring pride of ownership to a community.
For more information please email: rafael@thehomemap.com or in California, you can apply directly at: Apply for a FHA Streamline Refinance
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