Florida refi is becoming a popular choice amongst property owners in the Sunshine State. Homeowners enter into mortgage refinance for a variety of reasons. The most common include: refinancing to obtain a lower interest rate, consolidating multiple loans, and cash-out refinancing.
Another reason to enter into Florida refi is to extend mortgage loan terms. Many homes in Florida have decreased in value. Investors who own real estate for use as long term or vacation rentals find they must decrease rental rates to remain competitive. By refinancing mortgages investors can reduce their monthly payment and lower rental rates to attract tenants.
Lenders view mortgage refinance as less risky than providing new home loans. Borrowers have already established a history of paying monthly installments and often have accrued home equity. Refinance rates are generally lower than those charged for taking out a second or third mortgage. However, borrowers must be prepared to pay settlement costs which can range between 2- to 4-percent of the amount borrowed.
Closing costs are similar to those incurred when taking out the original loan. Borrowers must undergo a financial audit and provide lenders income statements, tax returns, outstanding debts, and list of current expenses.
Common mortgage refinance fees include: loan application, points, property appraisal, home inspection, attorney fees, and prepayment penalties. Most mortgage loans include a prepayment clause which can be found in the Truth in Lending statement attached to the mortgage note. VA, FHA, and loans established through chartered credit unions are exempt from prepayment penalties.
Prepayment clauses vary by lender and type of mortgage. Lenders known to include prepayment clauses include World Savings Bank, Golden West Financial Corporation, Countrywide Credit Industries, Washington Mutual, First Nationwide Mortgage, and Bank of America.
Some lenders assess mortgage prepayment penalties during the first five years of the loan. Others decrease the penalty over the course of the loan. For example, the penalty might start at 5-percent of the loan balance and decline by 1-percent each year. Some banks assess a penalty equivalent to six months of interest. Borrowers should review their original loan documents to determine if a prepayment clause exists.
Another consideration of mortgage refinancing is current interest rates. Borrowers should only enter into Florida refi if they can reduce their rate of interest by at least 1-percent. However, borrowers should strive to reduce interest by 2- to 2-1/2 percent in order to achieve maximum savings.
Florida has been hit hard by foreclosure and many homeowners have witnessed substantial decline in property values. Reduced property value equates to reduced home equity and can prevent some borrowers from obtaining Florida mortgage refinance.
Lenders typically require borrowers to have a minimum of 5-percent home equity before entering into mortgage refinance. Borrowers must also possess a FICO score of 720 or higher and a solid credit history of making loan payments on time.
Florida property owners should spend time comparing mortgage lenders, interest rates, and refinance rates to determine if Florida refi is the best option. One of the most credible sources for mortgage refinance comparison is BankRate.com.
Additionally, our Florida refi article library provides a wealth of information and resources to help property owners make informed choices. We discuss the pros and cons of refinancing mortgages, along with other finance strategies such as home equity loans, home equity lines of credit, and loan consolidation options. New articles are added on a weekly basis, so take a moment to subscribe to our mailing list and receive notification when new information becomes available.