Many Pennsylvanians are in a unique situation to refinance their purchase mortgage and save on interest and monthly payments. Pennsylvania mortgage refinance rates are much lower than they were in 2008 or earlier. Home prices are also on the rise. This means, depending on when you secured your initial loan, and what your initial loan terms are, you could be in a great position to refinance your home.
The decision to refinance is multifaceted
Of course, there are many variables that go into the decision to refinance. One consideration is the overall market outlook for the state. The median housing price in Pennsylvania, in 2012, was $142,000. Zillow predicts the median home price to continue to rise and eventually reach $164,000 by 2018.
As housing prices increase, interest rates have also been climbing, albeit slowly.This leaves homeowners to make a decision about refinancing. How much did you purchase your home for? How much is it worth now? The more equity in your home, the more refinance products are available to you – and at a better rate.
Some popular reasons to refinance might be:
- Your credit score has improved and you’re now eligible for better loan terms
- Your loan to value ratio has improved, and you’d like to refinance as a way to fund a large project like a home renovation.
- Interest rates have gone down since you secured a purchase mortgage. Refinancing could help you secure a lower monthly payment, or a lower life of loan cost.
- You’re looking to change your current loan terms.
Homeowners whose existing mortgages carry an interest rate that is greater than one percent over the current rates should look into refinancing. Those whose existing home loan is an Adjustable Rate Mortgage (ARM) should take advantage of low 30 year refinance rates to lock in a comfortable monthly payment. Because most Pennsylvania banks and finance companies require a minimum of 10 percent equity to qualify for refinancing, Pennsylvanians who meet this requirement should find out how refinancing can improve their family financial profile.
Types of refinancing available in Pennsylvania
Whether the borrower’s current mortgage is FHA, VA loan, a fixed rate or adjustable rate loan, or held by a local bank or one of the many finance companies, a good family financial manager can determine if the current refinance mortgage rates in Pennsylvania can beat your current situation.
Common financing options are similar to first loan products:
- Fixed rate: loans come in 10,15, 20, and 30-year terms, most often. The interest rate will never change with this type of loan, making it easier for many homeowners to budget. If you are refinancing, 30-year products may extend the overall cost and length of your loan, so opting for a 10, 15, or 20 year may be in your best interest. As with any product you consider, it’s best to crunch the numbers on a mortgage calculator to see how new terms will impact your bottom line.
- Adjustable rate: If you’re planning to move out of your home soon, or are nearing the end of your initial loan’s life, an adjustable rate mortgage could be the best product for your refinance. The terms are shorter than a fixed rate, and initially, the interest rates will be lower. After a predetermined period of time, adjustable rate mortgages increase or decrease with the market value. This means eventually you could be paying a higher amount of interest than your budget allows, so select this option with care. Ask a mortgage broker if you are unsure whether this product would be right for your situation.
- FHA and VA: These government-backed loans offer benefits for many homeowners. Because the terms are slightly more relaxed than conventional refinance mortgages, more homeowners can qualify. The credit limits and loan to value ratios are less stringent than with fixed rate and ARM loans.
Some programs, such as those overseen by PHFA, may be available at low or no cost to state residents.
Further refinancing considerations
For homeowners who have noticed an uptick in their home’s value could consider a refinance program available in Pennsylvania called a cash-out mortgage refinance.
A homeowner can take out a new mortgage that is greater than the balance of the old home loan, and receive the difference in cash. Not only does a cash-out refinance have the potential for lowering the borrower’s monthly mortgage payment, but the extra cash can go towards paying off debts or making home improvements that will increase the home’s value.
For Pennsylvania (PA) families that struggling to keep their homes in a difficult economic climate, the REAL program — REfinance to an Affordable Loan — is a viable option offering some of the best refinance mortgage rates in Pennsylvania. Some of the criteria for REAL qualification include:
- A credit score above 620
- Less than two months behind in mortgage payments
- Total monthly debts are less than half of the family’s income, before taxes
The government-sanctioned Pennsylvania Housing Finance Agency (PHFA) can provide details on the REAL refinance option as well as the HERO program, in which PHFA actually purchases a resident’s mortgage and then revises the terms into a more affordable format.
Finding the best Pennsylvania lender
Before settling on a refinance decision, make sure you’ve done your homework properly. There are many banks fighting for your business, which means no two lenders will offer the same deals and promotions.
Credit unions or community banks are usually member-owned, not-for-profit structure, which allows them to provide more incentives to their customers. These incentives could come by the way of lower interest rates, and better refinance terms.
Regional banks, like Chase or PNC Mortgage, also offer their own unique benefits. PNC Mortgage, for instance, takes into consideration non-traditional credit history, like the amount of on time rent payments you’ve had. This flexibility with creditworthiness can mean a better refinance mortgage rate than with competitors that don’t take non-traditional credit history into account
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