There is a little used program through CDA/the Maryland Mortgage Program (take your pick as to what you want to call it) called the Lifeline Refinance. Little used because until last Friday, it's rate was 6.5% with mandatory 2 points. Hot on the heels of CDA purchase loan rates changing, Maryland's Department of Housing and Community Development has revamped their refinance product.
Finally, a refinance product geared toward Adjustable Rate Mortgage holders who do not have a lot of equity in their home. The new Lifeline Refinance through CDA will allow home owner's to refinance up to 105% their current home value at 6.5% with 0 points, and 6.25% with 2 point. Yes, if you had equity in your house and could refinance some other way that is higher than market rates, but for home owners who need a 95%-105% loan to value refinance, this program is a godsend.
Let me share with you what I've discovered to be one of the larger problems facing home owners who currently have an ARM or sub-prime loan and have bought within the last 2-3 years. Time and time again I have had a borrower who would like to refinance, has good income, has always paid their mortgage on time, yet it was an interest only loan or they haven't paid a lot of principal down since it's so early in the life of the loan so they owe all or nearly all they have originally borrowed.
We go to look at the comparable sales in their neighborhood to find that if we get an appraisal, the value will be about the same or a few thousand more/less than what they purchased the home for. We add up what the new loan amount will need to be to pay off the old mortgage and find that the only way it will work is if the home owner brings thousands of dollars to the table at closing. In effect, they are unable to refinance because of a lack of equity.
Maryland's Lifeline refinance can truly be the difference in allowing you to refinance to lower fixed rate, or being stuck in your ARM or sub-prime loan with no options of how to get out. I can't stress enough how big and wonderful this change is in allowing up to 105% financing. While programs like FHA Secure talk the talk about helping people refinance, Maryland's Lifeline product is doing something to address the real issues of why people are unable to refinance.
As for the Lifeline refinance website, it used to be listed on the main "More House 4 Less" site, but now it can be found HERE. Of course, you can also contact me directly with any questions, and I can help you get started with the process.
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