August 13, 2024
FHA “no cash-out” refinance options can help first-time home buyers and experienced homeowners alike. If you need to explore your options to lower interest rates, shorten a loan term, or switch to a fixed-rate mortgage, consider the options discussed below.
FHA No-Cash-Out Refinancing
The FHA no-cash-out refinancing option is right when you want to modify the terms of your existing loan without getting cash at closing.
Refinancing into a fixed-rate, no-cash-out FHA loan is suitable for many when interest rates are at or below the rates the borrower initially qualified for.
Refinancing into a fixed-rate loan from an adjustable-rate mortgage can make for a more predictable loan, even if the rate isn’t as competitive as you might like.
Having a rate that will not change or will not change again provides more stability for some borrowers.
Additionally, homeowners can refinance into a shorter-term loan to build equity, pay off the mortgage sooner, and benefit from stability and predictability by switching from an adjustable to a fixed-rate mortgage.
Types Of No-Cash-Out Refinancing
FHA no-cash-out refinance options include the FHA Rate-and-Term Refinance, which allows for changes in interest rates, loan terms, or both to make mortgage payments more affordable or pay off the loan sooner.
The FHA Simple Refinance is specifically for refinancing existing FHA-insured mortgages, offering similar benefits as a rate-and-term refinance but limited to FHA loans.
FHA Streamline Refinances are for those with existing FHA loans who want to get into a lower rate, lower monthly payment, or out of an adjustable-rate mortgage.
These loans require less paperwork and potentially no appraisal since the lender uses the original mortgage application to inform much of the transaction.
Eligibility requirements for FHA No Cash-Out Refinancing include being current on mortgage payments at the time of application. Don’t have any missed housing payments in the previous 12 months before you apply.
When evaluating the benefits of FHA no-cash-out refinance loans, it’s crucial to consider factors such as closing costs, mortgage insurance, and the break-even point of the loan.
Borrowers should determine when the savings from refinancing will exceed closing costs by doing basic math.
Not all lenders offer all FHA loan products, so it’s important to make sure the lender you choose offers the refinance loan you need. Shop around for a participating FHA lender; you’ll be glad you did
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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