What Is A Streamline Refinance Loan?
A streamline refinancing loan refers to a refinancing scheme for a mortgage loan that has been offered by the Federal Housing Administration (FHA) and the borrower has maintained the payment history within a set acceptable standard. The loan approval process and the money disbursement processes are fast and simple with the document requirements kept at minimum. There are several benefits to a streamline refinance loan which includes reduced payment. Read on for more information on the various clauses in a streamline refinance loan and its limitations.
Some basic concepts of a streamline refinance loan are:
- The basic requirement for a streamline refinance loan is that your existing mortgage contract should be offered or approved under the FHA schemes.
- The new refinancing contract can be drawn for either the same or lesser amount that the original loan amount. Streamline refinance loans are not offered for more amount that the original loan amount.
- The term of the streamline refinance loan contract cannot exceed the original loan term plus 2 years. Also the total term cannot be drawn for more then 30 years.
- You can get any foreclosing charges as well as escrow expenditure like insurance and taxes to your streamline refinance loan.
- However, you cannot add any late payment or delinquency charges onto your refinance amount. Also skipped payments are not included in the streamline refinance loan scheme.
- Streamline refinance loans are started on the first of every month. Any payments for the previous month need to be paid as per your original mortgage contract to the lender. For example if your mortgage installments are due on the 20th of every month and you have obtained a streamline refinance loan from the 1st of December, you would need to pay your 20th November installment to your original lender as per your original mortgage contract.
- If FHA has withdrawn its approval for the property or housing unit that you have a FHA approved loan running, you can still go ahead and apply for a streamline loan.
Benefits of Streamline Refinance Loan:
The greatest benefit of a streamline refinance loan is undoubtedly the fact that the loans do not have to undergo an elaborate approval process. The biggest beneficiaries are those consumers who are unable to qualify for a loan because of a drop of the value of their property. Also this type of a refinance contract does not need any income verification, a much elusive benefit not offered by most lenders in the mortgage market today.
Another factor that attracts many consumers towards streamline refinance loan is that the contracts have easier foreclosure terms when compared with a normal mortgage contract. This is simply due to the fact there is much less paperwork and other administrative work involved in streamline refinance loans. Hence consumers can benefit from lower closing and other administrative costs. Also as stated above, a streamline refinance loan is processed at a much faster speed and involves lesser hassles and paperwork when compared to a normal mortgage loan.