FHA Streamline: Simple & Hassle Free FHA Refinancing
When it comes to FHA vs conventional home financing, the biggest disadvantage of FHA financing lies with the FHA PMI (FHA loan mortgage insurance) which needs to be paid upfront at a rate of 1.75%, as well as monthly at an annual rate of 0.80% to 1.05%.
Thankfully, with FHA Streamline, homeowners can secure a lower monthly loan and FHA insurance repayment rate, simply by refinancing their existing FHA-backed home loan.
FHA Streamline Vs Conventional Home Refinancing
When we think of refinancing, we think of refinancing which is undertaken in order to qualify for lower interest rates. This and, of course, refinancing which is undertaken in order to take cash out of the equity in a home in order to pay bills, invest, and spend on new property renovations.
Given the above, FHA Streamline differs slightly from conventional refinancing. This is because the Streamline program is only available to those who can prove that there is a tangible benefit involved with refinancing. In fact, such benefits are required to equate to a 0.5% (or greater) reduction in future combined loan and FHA PMI monthly repayments.
Should you Refinance through FHA Streamline?
Recently, FHA insurance rates on new home loans were cut from 1.35% to 0.85%. This means that if you took out your FHA loan at the higher rate, refinancing via FHA Streamline could help you save thousands. As an added bonus, when people use FHA Streamline to reduce their monthly FHA PMI payments, refinancing will take into account their property’s original value at the time of purchase, not a property’s value at the time of refinancing.
FHA Streamline Advantages
Literally designed to streamline the refinancing process and make it as simple as possible for existing FHA home loan holders, FHA Streamline does not require a property appraisal, nor does it require homeowners to provide proof of their income.
FHA Streamline Disadvantages
By far the biggest disadvantage of refinancing a property via FHA Streamline regards the fact that homeowners can not take cash out of their property at any time.
Unlike conventional home refinancing, FHA Streamline does not allow homeowners to access any of the equity in their property. Also, reducing FHA PMI payments through refinancing is only possible if homeowners are fully up to date with their existing home loan payments and have a default-free recent payment history.