Refinancing in Tennessee (TN) can bring immediate and long-term benefits—monthly savings and in some case years off the life of your loan. With the myriad of no-cost or low-cost home mortgage products being offered by lenders today, refinancing is something Tennessee homeowners should be researching.
Homeowners taking advantage of low refinance mortgage rates in Tennessee for a variety of reasons: to avoid foreclosure, to free up funds for another down payment, or to pay for life milestones like their children’s education. Many are using FHA (Federal Housing Authority) loan programs to secure the lowest interest rates and cash out their home equity.
The best current loans are 30 fixed rate mortgages in Tennesee
Recent foreclosures across the United States resulted from adjustable rate mortgages—at least in part. Many of these mortgages featured low introductory interest rates, making them affordable for many first-time home buyers or home buyers without high incomes.
However, due to adjustable rates, the banks and other lending companies ultimately raised those rates, uncomfortably high. That, coupled with a recession in the general economy, made it hard for many people to keep current on their mortgages. Tennessee was especially burdensome, leading to the Volunteer state having the 12th highest foreclosure rate in the nation in 2008.
Fortunately, the climate has changed and refinance options in Tennessee include fixed 15-year refinance rates as well as 30-year refinance options that involve more consumer protection.
Refinancing, in Tennessee, without an appraisal
Tennessee homeowners can use the FHA Streamline process to refinance their mortgage without getting an intrusive home appraisal or income review. The simple, low-stress FHA Streamline loan is especially designed for homeowners who have a consistent record of on-time loan payments. Here are a few things to know about Streamline loans:
- They are intended for owner-occupied residences
- They are intended for people whose current loan is FHA-insured
Sometimes people whose home value is under, say, $400,000 look into Streamline loans and only see a savings of $50 to $100 a month. If you find yourself in that position, don’t be underwhelmed. Having another $50 a month is sometimes the difference between having gasoline in your car or staying current on your cell phone bill. If you are not financially challenged (aka living paycheck to paycheck), then consider using that $50 to $100 in savings to pay down the principal you owe on your home. This can reduce long-term loans by months and in some cases years.
There are plenty of lenders out there who can offer you a Streamline loan process and help you crunch the numbers to determine what’s best for you. Take advantage of their knowledge. You can also use a Tennessee mortgage calculator to see how much a Streamline loan could save you.
Repair that fixer-upper
Some homes need a lot of love before they can house a family. With that in mind, FHA offers the Streamline K or Streamline 203K Limited Repair Program.
Home buyers can add up to $35,000 to their mortgages to improve or upgrade a home before moving in. This is a special type of no-appraisal loan designed for property owners planning home improvements, and they can be used for one-unit to four-unit dwellings at a time. Large condominium developments are eligible, but construction must be staggered. With the 203(K), the owner is able to combine the debt already owed on the property plus the cost of future upgrades. As an added bonus, up to 6 months of rental payments may be included in the refinanced mortgage if the property will be uninhabitable due to the planned rehabilitation.
Here are some things to know about the Streamline 203K program:
- Structural repairs are not covered by these types of loans as they are not considered to be minor
- Additional rooms or “new construction” is not covered
- Repairs and improvements must be able to be completed in 3 months or less
- Repairs and improvement must meet all local building and zoning codes
- Repairs and improvements must comply with HUD’s Minimum Property Standards
Everyone’s idea of a fixer-upper isn’t the same. A major renovation project is not the type of home that would work for you here. But here’s a list of replacements or repairs that would fall in line with the Streamline 203K:
- Existing HVAC systems
- Plumbing and electrical systems
- Weatherization and waterproofing
- Roof repair, including gutters and spouts
- Exterior deck, patio, porch replacement or repair
- Window and door replacement and exterior siding
- Septic and/or well replacement or repair
- Improvements for accessibility
- Lead-based paint stabilization or removal
The cash-out refinance in Tennessee
If you are in the coveted position of having a home with a market value greater than what you paid for it, you have something called equity. In addition to that, if what you owe on your home is less than its market value, your equity position is in even better shape. Banks understand this. They also understand you may not want to sell your home. So, they let you tap into the equity of your home by creating a lending product called a cash-out refinance.
Here’s how an example of how a cash-out refi in Tennessee works:
- Owner purchases a home for $100,000 and puts 20 percent down, leaving a principal of $80,000
- Owner makes payment over a number of years and now only owes $70,000 of principal
- Owner does a cash-out refi with a lender who pays off the mortgage principal and creates a new loan for $100,000, distributing $30,000 cash to the owner
The cash-out refi is an excellent way to get liquid cash that can pay down debt, be used for home improvements, help fund college tuition or make it easier to afford a new car. You will be charged fees by your lender, but typically they are spread out over the course of the loan within the monthly payments. Doing a cash-out refi extends the life of your loan, so it’s not for everybody. But anyone who does it, will see what may be some much-needed cash.
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