How To Refinance Second Mortgages Heres What You Need To Know
Many homeowners refinance their mortgage at least once during the lifespan of their loan. If you already have a second mortgage, you may not have considered the possibility of refinancing your second mortgage. Refinancing second mortgages may prove to be beneficial for homeowners who are looking for lower interest rates and monthly payments.
Refinancing a second mortgage is generally similar to refinancing the first mortgage, but there may be different reasons to refinance again.
If you want to learn about refinancing your second mortgage, then read on. Youll need to take some steps in order to refinance.
Important Deadlines For Mortgage Relief
Since March 2020, homeowners have had certain protections under the CARES Act.
These measures apply to conforming loans as well as FHA, VA, and USDA-backed loans.
- Foreclosure moratorium: Mortgage companies cannot start foreclosure proceedings against homeowners who are unable to make home loan payments until at least
- Mortgage payment relief: Homeowners may opt into a forbearance plan, pausing mortgage loan payments for up to 12 months if they are experiencing financial hardship
As of , borrowers with Freddie Mac or Fannie Mae loans can request an additional 3 months of mortgage forbearance, for up to 15 months total. To be eligible, you must be in a current CARES Act forbearance plan as of February 28, 2021.
Some homeowners with federally-backed loans can also make an initial request for loan forbearance up to February 28, 2021.
However, this may vary by loan type FHA, VA, or USDA and by loan servicer. So check with yours to see how much time you have to submit a forbearance request.
Read on to learn more about how loan forbearance works and how to request mortgage relief if youre experiencing financial hardship.
Can The Government Help Me With My Mortgage
Government support if you cannot pay your mortgage. If you’re having trouble paying your mortgage, several government programs can help. These include the mortgage rescue program, mortgage interest coverage, and other government benefits that can increase your income. Please contact your lender first.
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Mortgage Aid: How It Works
- The Homeowners Assistance Fund can help you pay not only your mortgage, but also your taxes, insurance, utilities and common charges like monthly homeowners association dues.
- The U.S. Treasury Department is sending money to states to distribute direct financial assistance through state housing agencies.
- The amount of mortgage aid depends on each states number of late mortgage payments, foreclosures and unemployment statistics, for example.
- States must spend this Covid-19 mortgage relief by September 30, 2025.
- Contact your state housing agency to learn more about Covid-19 mortgage relief in your state.
Stimulus Money Is Available To Certain Homeowners
Under the terms of the American Rescue Plan Act, homeowners can become eligible to receive stimulus money from the Homeowners Assistance Fund provided certain criteria are met. They must:
- Have an income that doesn’t exceed 150% of the area median income
- Have experienced financial hardship after Jan. 21, 2020 and be able to provide proof of the hardship. Examples include healthcare expenditures or a job loss
- Have a mortgage balance below $548,250 as of 2021
For eligible borrowers, the money can be used for many different home-related expenses including:
- Mortgage payments
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Make An Informed Decision When Selecting Your Stimulus Program
Choosing the right mortgage stimulus program for the middle class requires you to know the type of aid and relief offered by your lender and whether you qualify for it.
Mortgage interest rates have reduced since the beginning of 2021, and you can take advantage of this by refinancing your mortgage. This will not only maintain your credit score but even lead to better personal finances for you.
Many homeowners have still not taken advantage of the new stimulus package because they are unaware that they are eligible.
When you choose the right stimulus program, you can save on your monthly mortgage payments and even get some extra cash in your pocket to help you pay other bills.
Fact Sheet: Biden Administration Announces Additional Actions To Prevent Foreclosures
These options augment additional COVID protections HUD published last month. These included the foreclosure moratorium extension, forbearance enrollment extension, and the COVID-19 Advance Loan Modification: a product that is directly mailed to eligible borrowers who can achieve a 25% reduction to the P& I of their monthly mortgage payment through a 30-year loan modification. HUD believes that the additional payment reduction will help more borrowers retain their homes, prevent future re-defaults, help more low-income and underserved borrowers build wealth through homeownership, and assist in the broader COVID-19 recovery.
Additional AssistanceIn addition to these new opportunities for borrowers, agencies across the federal government are also taking other steps to support borrowers as our economic and public health recovery continues.
Giving Borrowers the Information They Need to Understand their OptionsThese new loan modification and payment reduction options will only give borrowers the relief they need if borrowers have the information to understand their options.
Borrowers should contact their servicer or housing counselor as soon as possible to learn more about the options available.
For borrowers not currently in forbearance, there is still an opportunity to access relief.
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Helping Businesses Keep Their Workers
To support businesses that are facing revenue losses and to help prevent lay-offs, the government is proposing to provide eligible small employers a temporary wage subsidy for a period of three months. The subsidy will be equal to 10% of remuneration paid during that period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. Businesses will be able to benefit immediately from this support by reducing their remittances of income tax withheld on their employees remuneration. Employers benefiting from this measure will include corporations eligible for the small business deduction, as well as non-profit organizations and charities.
Why Refinance Second Mortgages
There are a number of reasons to refinance a second mortgage. Many times, they may be different than the reason used to refinance the first time.
Some borrowers may refinance for lower interest rates, especially if those rates are significantly lower than when they took out of their second mortgage, or if their financial situation has improved. This is a common step taken by people with improved credit scores.
The types of second mortgages people may want to refinance for lower interest rates include:
- Piggyback Loan: This is a home equity loan or line of credit that is made at the same time as your main mortgage. It allows borrowers with low down-payment savings to acquire loans for more funds to lower their loan-to-value ratio and to qualify for a mortgage without paying private mortgage insurance .
- Home equity line of credit : This is essentially a revolving source of funds that you can access as you choose. HELOCs usually include a withdrawal period, where you can access as little or as much of your available funds as you want, followed by a repayment period that requires you to pay back the principal, plus interest.
- Home equity loan: This is a loan in which you use your home equity as collateral. It comes as a lump sum of cash.
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Congress Mortgage Relief Programs
Homeowners who have experienced financial hardship during the pandemic have a few options for mortgage relief.
To help borrowers struggling with mortgage payments due to unemployment or illness, Congress enacted certain mortgage stimulus programs as part of the CARES Act.
Many of these assistance programs have been extended into 2021 to help those who are still struggling financially.
If you find yourself in need of financial assistance, current options include:
Biden Signed $10b In Mortgage Help For Homeowners How Do You Get Money
The latest COVID relief package signed into law by President Joe Biden sets aside billions for homeowners struggling to make their mortgage payments and other bills related to owning a home.
Over 10 million Americans are currently behind on their mortgages and feeling “housing insecurity,” according to census data. If you’re in that group and have been piling up debt, how do you claim some of the money?
Its likely to take many months for the funds to get into the hands of those who need it largely because of the way its being disbursed, experts warn.
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Is There Congress Mortgage Stimulus Or Covid
Although theres no current mortgage stimulus from Congress, there is federal help available for homeowners.
When President Joe Biden signed the American Rescue Plan into law in March 2021, it famously included stimulus checks to nearly all households. It also provided special financial assistance for homeowners who were or are struggling financially as a result of the COVID-19 pandemic.
The Homeowner Assistance Fund is intended to help with your monthly mortgage payments and with property taxes, homeowners insurance, homeowners association fees and utility bills.
Although these are federal funds, theyve been sent out to states to administer. For help, you apply to your states housing finance agency. Locate your states agency and contact information with this lookup tool.
There are some eligibility requirements for these funds. To qualify, your mortgage balance must be $548,250 or less, and most of the funds are designated for borrowers with average or below-average incomes.
What Is A Heloc
Home equity lines of credit are a revolving source of funds that you can access as you choose. HELOCs usually feature variable interest rates, depending on the lender.
HELOCs have two phases: the draw period and the repayment period. The draw period is usually 10 years. This is when you can access your available funds as you choose, and as little or as much as you may need. During this time, youll most likely only be required to make small, interest-only payments against what you borrow.
If you dont ask for an extension after the draw period, then you will enter the repayment period. Once in repayment, you can no longer access additional funds, and you must make payments to the principle, plus interest. The length of the repayment period varies, but most lenders have a 20-year repayment period. Depending on your lender, you may be offered different types of repayment options.
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Streamline Refinance Eligibility: Lower Your Interest Rate Quickly And Affordably
You may be eligible for a Streamline Refinance if:
- You have an FHA, VA or USDA loan
- You will benefit demonstrably from the refinance, such as by a lower mortgage rate or monthly payment
- No missed payments in the last 6 months
If you meet these conditions you are very likely to have access to lower rates but you need to act now before rates go up. Speak with your mortgage lender about your personal finances and relief options.
Harp Replacement Program Faq
Who qualifies for a HARP replacement program?
HARP replacement programs are available for homeowners with conventional mortgages who dont have enough home equity to refinance. To qualify, you typically need a loan-to-value ratio above 97% . Youll also need an on-time payment history over the past year, and it must have been at least 15 months since you bought your home or refinanced it.
What is the current HARP replacement program?
FMERR is the HARP replacement for borrowers with Freddie Mac loans. This stands for Freddie Mac Enhanced Relief Refinance. HIRO, which stands for High LTV Refinance Option, is the HARP replacement program for borrowers with Fannie Mae loans. Homeowners with FHA, VA, and USDA loans should look into Streamline refinancing options, including the VA IRRRL for VA mortgages.
Is the HARP replacement program legitimate?
Yes, HARP replacement programs FMERR and HIRO are run by legitimate mortgage agencies regulated by the Federal Housing Finance Agency. These programs are available from mortgage lenders nationwide.
When did the HARP program end?
HARP, the Home Affordable Refinance Program, ended on December 31, 2018.
Can I refinance my HARP loan?
If you used the HARP refinance program in the past, you are not eligible to use the HIRO or FMERR program, according to Fannie and Freddies guidelines.
Did Congress pass a homeowner relief program? Whats the minimum credit score for HARP replacement programs?
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What Is The Government Mortgage Payment Act Of 2020
I am approaching this question with the assumption that you are referring to the Section 101 Exclusion from Gross Income of Discharge of Qualified Principal Residence Indebtedness that was in Congress recently signed spending bill. The amendments in this section of the bill apply to discharges of principal residence indebtedness after 12/31/2017 and before 01/01/2021.
You can read the bill here .
If this is not the provision to which you were referring, please provide further information .
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Who Is Eligible And How To Apply Explained
The fund is available for those who’ve experienced financial hardship after the pandemic initially hit the US.
To qualify, incomes must be 150% or less of the area median income or 100% of the median income for the US, whichever is bigger.
Plus, the homeowners mortgage balance must be less than $548,250.
How much you can get can vary by state and other factors, but qualifying households in Connecticut will be able to claim as much as $20,000.
While those in Illinois can soon apply for up to $30,000 per household.
According to the National Council of State Housing Agencies , states are working with the Treasury to finalize and implement their HAF programs “very soon”.
Some states are also using the funds they’ve received to set up pilot programs so they can start helping homeowners sooner.
To find out when your state is rolling out the support and how to get help, check the NCSHA website.
There is also another way to get mortgage relief – and thats through a federally-backed refinance program.
Qualifications For A Mortgage Stimulus
Related Articles
Youve been laid off from your job, and you must use the money you saved for a family vacation, a new car or even retirement to feed your family and pay overdue bills. Youre now contemplating applying for a mortgage stimulus package that provides temporary relief from your biggest monthly payment without the fear of losing your home. The coronavirus has affected millions of Americans who never thought theyd be in such a dire financial condition. The United States Congress has already enacted programs that provide relief until the pandemic has passed and life returns to normal.
Tip
If you already have mortgage forbearance, you can apply to extend your mortgage stimulus relief for another 180 days.
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Landlord Mortgage Relief Programs
In addition to mortgage assistance programs for homeowners, landlords have options as well. Not as far-reaching or as generous as those for single-family homeowners, multi-family property landlords with federally backed mortgages can request forbearance for 30 days, with another 30-day extension available. Check with your state government offices for programs offering assistance to landlords.
With a moratorium on rental evictions extended through January 31, renters are protected against evictions, but landlords still have mortgages to pay. American Banker reports that banks have been working with landlords of one- to four-unit properties to reconfigure their loan packages, but time is running out for forbearance. It’s projected that 2 percent of those loans will become delinquent by the end of 2021, sending the landlords and the banks into a tailspin, which is projected to last up to two years before recovery sets in.
References
Relief Refinance Program Benefits
These programs are intended to helphomeowners who are currently paying above-market mortgage rates, but cantrefinance because they have too little home equity.
The biggest benefit is that qualifyingborrowers can refinance into a lower interest rate and monthly payment, helpingthem afford housing costs and avoid foreclosure.
But there are other advantages tousing HIRO or FMERR, too. For example:
- No maximum LTV ratio If the home loan being refinanced is a fixed-rate mortgage, theres no maximum LTV for the new loan. That means if your mortgage is $150,000 and your home is only worth $130,000, you could refinance even though your loan-to-value is 115%
- Private mortgage insurance not required If you have PMI on your existing loan, it must be transferred to the new loan. But if you dont currently have PMI, you wont pay it on the new mortgage
- Streamlined application process Simplified documentation requirements mean you may not have to prove income, assets, or liability information. There is also no minimum credit score or maximum debt-to-income ratio
- You dont have to use your current lender Both electronic and manual underwriting options are available to the same or a new servicer
These loans remove many of the eligibility requirements for a conventional refi. Theyre often a faster and more affordable way for borrowers to get a lower rate and housing payment.
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