Understanding Streamline Refinancing

A streamline refinance option is not open to a lot of consumers. It is a privilege of those consumers who currently have an FHA insured loan. For this reason, a good many consumers initially opt to check out FHA loan products rather than one of the various other kinds of loan vehicles. Of course, when deciding which kind of loan is more attractive in the short, run, FHA loans do not always win out. In the long run, however, the FHA loan can actually save the homeowner a lot of money, simply because it is eligible for the streamline refinancing option.

A streamline refinance is little more than a refinancing of the primary mortgage so that it will lower the borrower’s interest payments as well as monthly principal payments. This kind of a streamline refinance presupposes that the borrower is financially in good shape and that the property will appraise for pretty much the amount of money that is still outstanding on the loan. FHA streamline refinancing does not permit for homeowners to take any equity out of their homes, so a cash-out refinance loan – such as it might be done to pay off debts or to obtain easy funds for a home remodel – is also not possible.

Fees associated with this kind of FHA streamline refinancing may be added to the loan, as long as there is sufficient equity in the property to justify this expense. If there is simply not enough equity present, the homeowner will have to pay the costs of the refinance up front. In such instances it pays to work with a lender that is open to negotiating these fees. Select lenders may decide to actually offer a slightly higher interest rate in exchange for not charging up front, out of pocket fees for the process.

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This of course begs the question if this is truly a good deal. After all, financing about $3,000 for 30 years is a lot more costly than simply paying for the expense up front. At the same time, there are borrowers who simply cannot come up with these funds, and thus – instead of foregoing the more advantageous interest rates – they do have the option of rolling this expense into the loan. There are some exemptions to the payment of fees, such as with investment properties. Such properties may undergo an FHA streamline refinance without an appraisal, but as such any fees have to be paid out of pocket.

The fee issue is the single sticking point that consumers experience when attempting to avail them of a streamline FHA refinance, but if they are working with a favorable lender motivated to make the loan happen, this disadvantage can be ironed out rather quickly. It bears mentioning that streamline refinances are not advertised as much as other loans. When it comes to these other loans, lenders usually stand to make more money on them in the long run, and therefore they are much more apt to advertise them to current customers and those who are considering a loan with their fiscal institution.