Whatever the reason you still need to know the advantages, the consequences and where there are potential pitfalls. Watch the video below to see if refinancing your mortage is an option you need to pursue.

Part of the acceptance criteria for mortgage refinancing under the ‘make home affordable’ plan was that the new mortgage could not exceed the current value of your home by more than 5% (i.e. 105% ).  That has proved to be a number that was not a workable level and so the criteria has been extended to 125% recently so that more people qualify.

Although this is a more practicable acceptance criteria in the spirit of the program, the level is getting a little scary in terms of the loan to value ratio and is starting to smack of what got us all in this mess in the first place. At the end of the day the intention is that the repayments need to be sustainable and the loan ultimately needs to be paid off.

For that reason I suspect that this will be the only increase that will be done so if you still don’t qualify I wouldn’t hold my breath, you may have to wait until house prices rise again to see yourself in line for the program and right now who knows when that will be for sure.

The Obama new stimulus package amounts to a massive $1 trillion bale out package that offers new loan options, grants and tax credits. So for home owners that are struggling, there is relief in site and it is possible to take a home loan mortgage refinance option to get lower rates of interest or longer repayment periods.

Obama has offered a $1000 incentive to encourage home owners to opt for mortgage refinance or loan modification instead of going for a short sale or foreclosure option.

There are rules that apply to these mortgage refinance deals : -

Loans guaranteed or issued by the Federal National Mortgage Association, (Fannie Mae) or the Federal Home Mortgage Corporation, (Freddie Mac), which are institutions that have been in existence since 1968 as government sponsored enterprises (GSEs), are all eligible for mortgage refinancing providing that :

• You are the owner of a 1 to 4 unit home
• The existing mortgage value is no greater than 105% of the valuation of your home. This has now increased to 125% since it became clear that it was locking many people out of eligibility for the program, see home loan mortgage refinance update.
• You are up to date with your payments and have not fallen behind.
• Your circumstances have not changed and you are able to afford the new lower repayments, e.g. you haven’t lost your job and consequently your income.

Additional information

The mortgage refinancing option is only available until June 2010
The applicant can ask for a fixed rate of interest rather than a variable rate (adjustable rate mortgage)
Longer term loans are being made available so that you can pay back over longer periods e.g. 30 years.
If your mortgage isn’t guaranteed or issued by the 2 primary institutions (Fannie Mae or Freddie Mac) then you are not eligible

Also on a cautionary note home loan mortgage refinancing may require some fees to be paid, you may also have to go through new credit checks and they typically take longer than the loan modification option. The best way forward for finding out if this it the choice for you is to approach your existing lender and see if you qualify and what the full conditions are so that you can make an informed decision.

For the United States this is one prong of a two pronged approach to to balancing out the financial chaos that has existed for homeowners since the near collapse of the banking system both in the USA and worldwide. I will be discussing  the 2nd ‘loan modification’ prong in a separate post.