The many reasons why military homeowners choose to refinance, aside from the obvious opportunity to enjoy a lower an interest rate, include shortening the term of the mortgage or converting from an adjustable rate mortgage.
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When Should Military Homeowners Refinance?

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Refinancing is defined as paying off an existing mortgage and replacing it with a new mortgage.

Historically, increased interest mortgage refinancing is related directly to decreased mortgage interest rates. For example, the benchmark 30-year fixed mortgage rate was at 4.89 in April of 2009, down from 6.46 percent in October. This spurred the refinancing of existing mortgages throughout the military community.

Both lowered interest rates and the proliferation of new government programs often provide powerful incentives to refinance an existing VA Mortgage, and these are available to military servicemembers at various times.

MILITARY MINDED REFINANCE?

The many reasons why military homeowners choose to refinance, aside from the obvious opportunity to enjoy a lower an interest rate, include shortening the term of the mortgage; converting to or from an adjustable rate mortgage (ARM) to a fixed-rate mortgage; consolidating debt; or leveraging some of the equity in the home.

Motivations for refinancing can have both positive and negative implications.

For example, refinancing in order to use some of the equity in your home can increase your monthly mortgage payments. And, if you are taking money out of your home in order to purchase something that may not be a wise investment - such as a vacation - it may be best to find another way to finance your purchases.

Before making the decision to refinance, weigh the short term benefits against the long term financial implications.

Your military base financial planner can help you determine the refinancing option best suited for your military lifestyle and family needs. Financial planning services are offered free for military servicemembers and many Defense Department civilians.

HARP AND HOME AFFORDABILITY

Military servicemembers can also benefit from special government programs that become available at various times.

Two such government programs designed to ease the national spike in foreclosures include the Home Affordability Refinance Program (HARP), and the Home Affordability Modification Program.

To qualify for HARP, you must have a loan controlled by Fannie Mae or Freddie Mac. Also, you cannot be no more than 30 days past due on a mortgage payment during the previous 12 months.

The interest rate for HARP can be 0.75 points higher, because you are allowed to borrow up to 105 percent of the home value. A military homeowner looking to borrow 90 percent of their home value would likely get a better interest rate by refinancing than employing HARP.

The Home Affordability Modification Program is for families in dire financial situations. To qualify, a military homeowner's mortgage payments must be more than 31 percent of his gross monthly income.



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