Refinancing With An FHA Mortgage
Refinancing a mortgage can have advantages and disadvantages – knowing both of them will help you make a more informed decision about which type of refinance you will choose.
There are cash out refinancing loans, no cash out loans, and for those with existing FHA mortgages, an FHA streamline refinancing option that usually requires some sort of benefit to the borrower.
The pros and cons of streamline refinancing are pretty simple.
In the “Pro” column, you get something that benefits you in the form of a lower monthly payment or a lower interest rate. Or you can step out of an adjustable-rate mortgage into a fixed-rate loan.
In the “Disadvantages” column, the biggest disadvantage – depending on the term of your new loan compared to the term of your original mortgage – is a renewed loan term. If you had a 30 year loan and you refinance to another 30 year loan, you will pay longer for the home.
But for those with a priority that involves making lower payments, making those payments for a while longer isn’t always as important as making the payments work within the borrower’s budget.
Refinancing loans with disbursement have their own advantages and disadvantages. Obviously, the withdrawal referee professional is getting money back for the transaction. However, one “downside” to this type of loan is that if you haven’t owned the home for a long time and haven’t built up a lot of equity, it may not make sense to apply for a payout refinance.
For those who have more equity and want to withdraw it in cash, FHA Withdrawal Refinancing has the advantage that you can use these loan funds for any purpose your lender can use your refinancing.
Other types of FHA loans like a 203 (k) rehabilitation refinance also provide money for the remodeling, but the projects you can undertake with these 203 (k) loan funds may be limited to a number of approved uses for the money .
Not so with an FHA disbursement loan, which means you could add a “luxury feature” that is not allowed on an FHA 203 (k) Reha loan. These luxury features could include a BBQ area or swimming pool.
Not everyone who refinances wants to get cash back for the transaction, but those who do will find that FHA payout refinancing is the most flexible option.
FHA 203 (k) Rehabilitation Loans and their refinance loan counterparts do not offer unlimited cashback – the money can only be used on renovation projects listed in the FHA Loan Rule Book, HUD 4000.1.
There are many uses for an FHA refinance loan, the key is deciding what you want to use the loan for and then finding the right type of refinance for you. Not every refinancing option is suitable for a particular purpose; If you are unsure which option is the best, contact a loan officer for more clarity on the right loan for the right needs.