There are of number of reasons to refinance your home loan, but perhaps the most popular reason, is to simply reduce your interest rate and therefore the interest paid over the life of your loan.
However, it is always important to look at not only the potential reduction in an interest rate and monthly payment, but also the cost associated with the refinance.
For that reason, more often than not, it makes sense to look into a no cost refinance, where the lender will essentially provide a credit to cover all fees needed for the completion of the refinance.
Whether you have a Conventional, FHA or VA loan, there are no cost refinance options available. Depending on what type of loan you have and your overall situation, one option might make more sense than another.
In addition, in certain instances, you may not need to obtain an appraisal or even verify income for a refinance as well.
Conventional Loan
Conventional loan no cost refinances are completed by lenders providing a credit for all costs associated with the refinance transaction, by providing a slightly higher interest rate to cover all fees. Often times that higher interest rate is just .125% to .25% higher than the best available market interest rate.
If a lender is willing to do this and you can reduce your interest rate by at least .50%, then a Conventional no cost refinance could make sense for you.
FHA Loans
FHA loans have the FHA streamline refinance program, which is a specialized program designed for those with existing FHA mortgages to refinance without an appraisal and without providing new income documentation.
On an FHA streamline, lenders should be able to offer a no cost refinance without an adjustment to a higher interest rate. However, whether or not the refinance makes sense will be largely dependent on when you took out your most recent FHA loan. This program usually makes sense when you took out an FHA loan in the past three years and the current FHA interest rate is lower than your existing interest rate, due to an FHA MIP refund credit that diminishes each month that you keep the loan from month 1 to 36 of obtaining an FHA loan.
VA Loans
VA loans have the VA Irrrl streamline refinance program and are perhaps the most advantageous of the no cost loan programs. The VA Irrrl program does not require an appraisal or updated income documentation for the approval process and lenders should be able to cover all costs for this transaction, while providing a market rate VA loan.
A VA Irrrl streamline refinance does have a .50% funding fee associated with it, for Veterans not in receipt of VA disability. However, the VA streamline can make sense, with even just a .25% drop in an interest rate.
As always, it makes sense to speak to a licensed lender, such as Strategic Mortgage to fully qualify and see what home loan options are available to meet your specific situation.
For more information on current home loan programs and options for existing and potential home owners, please contact Bill Kamboukos of Strategic Mortgage at (480) 219-3682 or by emailing: info@strategicmtgaz.com or online at www.strategicmtgaz.com
Strategic Mortgage, LLC – AZBK#0909514 - NMLS#158804 - Equal Housing Lender
Vasilios Kamboukos – NMLS#160440
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