Tuesday, July 31, 2012

FHA Streamline Refinance Nevada Just Got Lower Fees

By James Kent

Okay, admittedly, government programs to help homeowners have not been all they were cracked up to be. Until now. HUD had increased the cost of mortgage insurance (MI) on new FHA loans so much that it just did not make sense to refinance. The MI cost so offset the lower rate that for many FHA streamline refinance Nevada homeowners any savings was eaten up by the increased MI costs.

Good news! Now for homeowners with existing FHA loans on their home, the MI that had gone up to 1.25% of the loan amount per year has now been cut way back to what it cost several years ago, to just 0.55% of the loan amount. Put in dollar terms, let's assume an FHA loan amount on your home of, say, $200,000. That would cost $2500 per year just in MI fees. You pay those monthly, so that is $208.33 per month added to the mortgage cost. Now, that has decreased to just $1,100 per year, or $91.67 per month. That's a $1400 a year savings. Big numbers.

It doesn't account for those with FHA ARMs (Adjustable Rate Mortgages) to be able to lock in a fixed rate. For example, a homeowner with a 4.5% adjustable rate due to adjust this year may not be able to streamline into a 4.5%, or 4.25% fixed rate because they won't meet the 5% payment reduction threshold.

Are there any other Net Tangible Benefits? While the 5% rule is all that HUD seems to be concerned with, there are many other benefits. Everyone understands that lower rates generally equal lower payments, but most overlook the fact that a lower rate also results in a larger portion of the payment being applied to principle, building equity faster. The mortgage insurance will also terminate sooner rather than later. FHA Mortgage Insurance cancels when the loan to value ratio (LTV) reaches 78% of the original mortgage balance. This happens much faster with a lower interest rate. It is somewhat common to reach the 78% threshold 1-4 years early. Many borrowers are permitted to skip a mortgage payment in the process, without penalty.

So if you are looking to refinance, it may work out better for you than you originally thought. There are many benefits in looking for a FHA streamline Nevada refinance loan.

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