Gov't program can lower FHA loan interest rate
New bill restores cap for FHA mortgages to as high as $729,750. Credit: iStock
You stated that if he had an FHA loan, there was a program he could use to refinance. I missed what that program was called. I have an FHA loan with the same bank and also want to lower my interest rate.
My rate currently is 5.25 percent and I am current on my mortgage. Can you give me some direction on this?
Because this is a streamline refinance, costs should be minimal. All the lender is doing is lowering the interest rate on the mortgage. The paperwork and other details shouldn't change. So, if you have 25 years left to repay your loan, you'll still have 25 years -- you'll just pay interest at a lower rate for those years.
Pick up the phone and call your lender today.
We first thought about taking an early withdrawal, but decided against that with all the penalties and taxes. We are now thinking in terms of a 5/1 adjustable rate mortgage (ARM) and paying it off when we reach the age where we can withdraw without penalty.
Is this a good idea? Do you have any other suggestions?
Prices are extremely cheap in some second home locations, and there are loads of foreclosures, some of which might be well worth a look in terms of value. We recommend that you try to buy something cheap that will sell easily in five or seven years, in case your plans change.
We don't recommend 5/1 ARMs at the moment, simply because the fixed interest rates are so low. The best choice at the moment is a 15-year loan, if you can swing the payments. That will allow you to take advantage of even lower interest rates. That way, if you decide to keep the loan, you know you're protected against higher interest rate swings. (We recently refinanced to a 15-year at 3.25 percent, but the interest rate on a vacation home might be slightly higher.)
One option would be to refinance your primary home (assuming it is paid off) to a 10-year mortgage. Right now, those interest rates are hovering around 3.25 percent (or less). It's a great way to lock in a super-low rate. Essentially, you'll only be paying principal with very little interest in each payment.
Run some numbers and then talk to at least three or four different lenders to get an idea of what it will cost you to finance this property. If your vacation destination is in another state, consider speaking with a lender that is local to that area. You'll want someone on the ground who really understands what happens locally.
Good luck.
