California Home Loan Refinance Experts
California homeowners aren’t always happy with the terms of their current mortgage, especially if they took it out at a time when their financial background resulted in unfavorable terms. Fortunately, refinancing can be an option. Refinancing a home loan can help reduce the interest rate, can reduce their monthly mortgage payment, can allow the homeowner to pay off their mortgage quicker, or can even provide extra cash to invest into renovations.
However, it’s important that homeowners who are considering refinancing their mortgage speak with a home loan refinance specialist. Not every homeowner may be eligible to refinance their mortgage–and even if they are, it’s not always beneficial to do so. A home loan refinance specialist can help determine the best course of action.
What is a Refinance Loan?
A refinance loan is essentially a second home mortgage taken out by a homeowner. This second mortgage will typically have different terms than the first mortgage. It will be used to pay off the first mortgage so that the homeowner is only responsible for paying off the second mortgage. Homeowners often apply for a refinance loan if a second mortgage loan is available at better terms (such as a lower interest rate, a fixed interest rate, a shorter loan term that allows them to pay off their mortgage quicker, or a longer loan term to reduce their monthly mortgage payments).
Homeowners considering a refinance loan should be sure to speak to a specialist about their options and their needs before applying for a refinance loan.
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Refinance Rates in California
The interest rates* on a refinance loan will vary based on how long the loan’s term is, the borrower’s financial status and history, the amount of the loan, and the current market. Homeowners may be able to refinance for a lower fixed interest rate than their original loan depending on the market conditions; however, even if there isn’t a great difference in current rates, homeowners who have improved their financial status and credit score significantly may qualify for lower interest rates.
How Much Equity is Needed to get a Refinance Loan?
Generally speaking, it’s good to have at least 20 percent in equity* before attempting to refinance a conventional mortgage. However, this is not a rule. Having 20 percent in equity* means that if the homeowner takes out a refinance loan, they won’t have to pay for mortgage insurance. If the homeowner is willing to pay for mortgage insurance, they will need to have at least 5 percent equity to refinance. It’s worth noting that homeowners looking to refinance their loans to take cash out (which can be used for anything from renovating their home to paying off other debts) will need to be at around 80 percent loan-to-value.
It’s worth noting that equity isn’t necessarily required to refinance certain loans, such as FHA loans and VA loans.*
Refinance Programs with Government Assistance in California
The Home Affordable Refinance Program (HARP) is a refinance program created specifically for homeowners in California whose homes are upside down/underwater in value or whose loan-to-value rate is over 80 percent.* The program is meant to assist California homeowners who have remained current on their mortgage payments but who have not been able to refinance into better terms as a result of declining home values.
Other Refinance FAQ’s
California homeowners often have questions about refinancing their mortgage:
Can I Refinance a Reverse Mortgage?
Even though a reverse mortgage provides payments to the homeowner, it can still be refinanced. Homeowners who have a reverse mortgage may want to refinance if rates have lowered significantly, if there's an advantage to switching from an adjustable to a fixed rate, or if their home has appreciated in value and they want to tap into additional equity.
Can I Refinance a Second Home?
It is possible to refinance a second home. However, it will be easier to qualify at favorable rates if the homeowner can prove that the second home is a vacation home and not a rental or investment property. Additionally, most lenders will limit the loan-to-value maximums on second homes, which means that homeowners will be required to have more equity in their second home than if they were refinancing their primary residence.
Are There Rules on What I Can Do With the Refinance Funds?
Homeowners who want extra cash can refinance their mortgage for a cash-out refinance loan. This involves taking out a refinance loan that's more than what is owed and requesting the difference in cash. One of the most common reasons to get a cash-out refinance loan is to invest it back into the house through renovations or remodeling, which can increase the value of the home. However, homeowners can use their refinance funds however they wish, from paying off other existing debts to paying for college tuition. Some homeowners even use their cash-out funds for a vacation.
Can I Refinance From a FHA Loan*?
The FHA* does allow homeowners to refinance their FHA loans* through its FHA* Streamline Refinance program. This program makes it easy to refinance. It's only available to existing FHA-insured mortgages*, which are made by private lenders. These lenders usually require less paperwork for homeowners looking to refinance their FHA loans*. To be eligible, homeowners must already have an FHA loan*, be current on their mortgage payments, and have a reason for refinancing. However, cash-out refinancing is not available--the most a homeowner can take out when refinancing their FHA loan* is $500.
Can I Refinance From a USDA Loan*?
Homeowners with USDA* (United States Department of Agriculture) loans have three options for refinancing. USDA’s Streamline Refinance program allows homeowners to refinance without a new appraisal. They can even add or remove borrowers from their note. To be eligible, homeowners must be current on their payments, must have had their existing USDA loan for at least a year, and must meet the USDA's credit and debt-to-income requirements. The amount of their refinance loan cannot exceed the original loan amount.
Then there is the USDA* Streamline-Assist Refinance program. Homeowners with little to no equity can apply, no new appraisal is required, and there are no credit score or debt-to-income requirements. To be eligible, the loan must provide a $50 or greater reduction in the homeowner's monthly mortgage payments and the homeowner must have had a USDA loan for at least a year. However, homeowners refinancing USDA direct loans will need a new appraisal.
Lastis the Non-Streamline Refinance program, which is similar to the USDA Streamline-Assist Refinance program. The big difference is that there is no $50 payment reduction requirement. However, in return for the lack of such a requirement, the homeowner must obtain a new appraisal.
Can I Refinance a VA Loan*?
VA loans* can be refinanced in two different ways--an interest rate reduction finance and a cash-out refinance. Homeowners don't need to have a current VA loan to qualify for a VA cash-out refinance loan. Lenders are more strict when it comes to VA cash-out refinance eligibility, meaning they will look at the homeowner's credit score, require that the home being refinanced is the owner's primary residence, and require an appraisal.
Can I Use a VA Loan* More Than Once?
There is no limit to how many times an eligible veteran homebuyer can use the VA loan program. An eligible homeowner who has already used a VA loan once can just submit an application requesting that their entitlement be restored once they've repaid their original VA loan* in full.
Homeowners who are not happy with their current mortgage terms or who need cash back for whatever reason may want to consider refinancing their home loan. They should speak to a consultant to determine what their refinancing needs are and whether they are eligible to refinance their current home mortgage.
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