Trendy Mortgage Refinancing and Second Mortgage
Programs: A Brief Review
by Chris France
The combination of
rising interest rates (although still historically low) and rising home prices
has caused the robust mortgage market to slow from its record pace. This
has motivated lenders to either introduce creative new loan products or to
more aggressively market existing products. If you have not shopped for a
Mortgage Refinancing or Second Mortgage Solution in a while, you will find
numerous new products from which to choose. Following is a brief review of
some of the new and popular products available today.
Interest Only – With this loan program
you are paying only the interest on your mortgage and are not paying any
principal. This reduces your monthly payments and can allow you to afford
a larger home or save more money on a mortgage refinancing or home purchase
loan. If used carefully, you can also free up cash flow that can be used
for investment purposes or to pay down high interest rate debt.
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Negative Amortization – These are often marketed using the phrase
“option arm” or “choice mortgage”. With this loan type,
your payment does not cover all of the monthly interest. Often, your mortgage
balance is increasing and the underlying interest rate is usually a monthly
variable rate. These loans are used to dramatically reduce your monthly payment
and can be used for a mortgage refinancing or home purchase. This program
should be reserved for the more sophisticated borrower and it is important
that you understand the terms of the loan.
40 Year Amortization – Rather than paying
off in 30 years, this loan pays off in 40 years. As with the Negative
Amortization and Interest Only, this program is used to reduce your monthly
payment.
Stated Income / Reduced Income Documentation
Loans – There are a variety of these loan products available, but they
are primarily used to for individuals with difficult to verify income. These
can be used for mortgage refinancing, second mortgages and home purchase
loans. As lenders have become more comfortable with credit scoring, these
products have become very popular. Essentially the lender is relying on the
credit score for their loan decision. They realize that borrowers with higher
credit scores will pay their mortgage and they do not need to fully verify
their income.
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ALT
A Programs – The “ALT” is short for Alternative and the
“A” refers to the borrower category. These are categories of mortgages
that fall outside the more stringent guidelines of Fannie Mae and Freddie
Mac. Generally these mortgage refinancing programs allow for more flexibility
with regards to loan to values and income documentation requirements and
can be used for home purchase, mortgage refinancing and second mortgages.
Hybrid Second Mortgages – Traditionally,
your options for a second mortgage were either a fixed rate, fixed term loan
or a variable rate, open ended line of credit. Now, you can have the benefit
of both. You can start your second mortgage as a variable rate home equity
line of credit and then lock in all or a portion of it to a fixed rate for
a fixed number of years. Click here for more information on Click here for
more information on
Mortgage Refinancing
and Second Mortgage Solutions.
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About the Author
Chris France, Indianapolis, IN
christopher.france@branch.cfic.com
More Details about Mortgage Refinancing Second
Mortgage here. Chris France is a professional mortgage planner with over
10 years lending and banking experience. His programs assist clients with
increasing cash flow, reducing liabilities and building equity by integrating
a client’s mortgage decision with their overall financial plan. He is
a manager with CFIC Home Mortgage providing both purchase and refinance
transactions. Chris holds a B.S. in Finance and is Fair Credit Reporting
Act certified.
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