Refinancing Your California Mortgage Loan At Lower Rates
This ARTICLE On Refinancing Your California Mortgage Loan At Lower Rates Was PUBLISHED On July 23rd, 2019
California Homeowners Should Explore Refinancing Your California Mortgage Loan:
- Homes in California took a major hit during the 2008 Real Estate and Credit Collapse
- Many homes in California, depending on the county the home is located, where home values dropped 30% or more during the Great Real Estate Collapse of 2008
- Homebuyers who purchased their homes in 2010 through 2014 purchased homes at the bottom of the California real estate market
- Their homes have appreciated double digits in the past few years and now have substantial equity in their California homes
- These homeowners should explore refinancing their homes not just for lower their mortgage rates but also do a cash-out refinance mortgage
- Or if they have an FHA Loan they can see if they qualify for a conventional loan
- They can eliminate their expensive FHA annual mortgage insurance premium
In this article, we will cover and discuss Refinancing Your California Mortgage Loan At Lower Rates.
Refinancing Your California Mortgage Loan To Eliminate PMI
HUD requires FHA annual mortgage insurance premium of 0.85% for the life of the 30-year fixed rate FHA Loan:
- With Conventional Loans, no private mortgage insurance is required as long as the homeowner has 20% or more equity in their homes
- Homeowners with less than 20% equity in their homes will require private mortgage insurance
- Private mortgage insurance on conventional loans are much lower than the expensive FHA mortgage insurance premium
Refinancing your California Mortgage may save you tens of thousands of dollars over the term of your mortgage loan.
Basics On Refinancing Your California Mortgage Loan
The basics why homeowners should consider refinancing your California Mortgage loan is to pay off their existing mortgage loan and take on a new mortgage loan on their California home for several reasons.
Here are the reasons why refinancing your California mortgage may be beneficial.
- One of the main reasons why homeowners go through refinancing their current homes is to lower their current mortgage rates
- The combination of a lower mortgage rate and closing costs should be carefully considered when considering refinancing your California mortgage loan
- Make sure it makes sense
- If your monthly reduction in mortgage payments will be $40 per month but your closing costs out of pocket to refinance is $4,000, this case scenario will not make sense
- This is because it will take a long time to recoup the closing costs and the break-even point of your refinancing
The rule of thumb on refinancing your current mortgage loan is to have a minimum reduction of 0.25% in mortgage rate with no closing costs to be able to be worth it.
Reduction In Your Current Monthly Payment
Another main reason why refinancing may make sense is to lower your monthly housing payment by taking on a longer-term mortgage loan.
- Homeowners who currently have a 15 year fixed rate loan and are having a difficult time paying their minimum monthly mortgage payment, may explore refinancing their 15-year fixed rate mortgage into a 30 year fixed rate loan
The combination of a lower mortgage rate and extending the mortgage loan term, this can offer a substantial reduction in the monthly housing payment of the homeowner.
Refinancing Your California Mortgage Loan: Change In Mortgage Term
Some homeowners opt to pay off their current mortgage faster:
- Homeowners may want to refinance their current home loan from a 30 year fixed rate loan to a 15-year fixed-rate mortgage
- Another advantage of refinancing to a 15 year fixed rate mortgage from a 30 year fixed mortgage loan is that 15 year fixed mortgage rates are substantially lower than the standard 30-year rate loan programs
- Payments may be higher than the 30-year fixed-rate mortgage
- However, you will get lower mortgage rates and save tens of thousands of interest expense and pay your loan balance in half the time
Getting A Cash-Out Refinance Mortgage
As discussed earlier, many homeowners who purchased their homes several years ago have equity in their homes due to the appreciation of homes in California. Maximum loan to value on an FHA Cash-Out Refinance Mortgage is 85% Loan to Value. Maximum loan to value on Conventional Cash-Out Refinance Mortgage is 80% Loan to Value. All Cash-Out Refinance Mortgage Loans are tax-free and can be used to pay off other bills, do repairs or anything the homeowner want to do such as take a long vacation or purchase a second home.
July 23, 2019 - 4 min read