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Should You Refinance Your Mortgage: An Interview with Eleanor Thorne of NC FHA Experts

By Eleanor Thorne

Please describe the background of your company and some of your qualifications.

We owned a fairly large brokerage shop that we sold to River Community Bank in 2006. We are a Community Bank, based in Virginia, with a Mortgage Division operating in North Carolina. I've been in the mortgage business for over 25 years.

How much equity do I need to have in my home before I consider refinancing?

There are 2 reasons to refinance a home. Once is to pull equity out of the home, the other is to lower your payments. For purposes of answering these questions, we are only covering a situation where someone is trying to lower their payments. A Cash Out Refinance is really a bit more complicated process- not impossible, but more complicated.

If you are considering a refinance to lower your monthly payments, you will need to pull your "paperwork out" and find out what kind of mortgage you currently have, and who "holds" that mortgage.

In most cases, these days, if you are refinancing a home you currently live in, and the current mortgage is a Government Backed Loan, you need no equity at all. If you've rented out your home, and you have a FHA Loan on the Property, we can still do a "streamlined loan" that has no Appraisal.

If you have a Conventional Loan, and it's on the Fannie Mae or Freddie Mac list, you can also refinance with a "streamlined" process known as the HARP Loan.

My credit score isn't very high, will this affect my ability to refinance?

For a Government or HARP Refinance, you must be current on your mortgage with no more than one late payment in the last 12 months, and no late payments in the past six months. There are some Banks who have minimum credit requirements for programs- but for a VA Loan or FHA Loan, you do not "need" a credit report. We are really only focusing on your mortgage payment to refinance the mortgage to a lower payment.

What are the main reasons people choose to refinance their mortgage? Is refinancing the best option if I want to lower my monthly payments?

In many cases, we see "relationship" issues that make folks want to refinance, in order to take someone else off of the mortgage. In some, the home owner purchased the home with an adjustable rate mortgage, and fears that mortgage payments could go up later this year. If you are trying to lower your monthly payment, and you have a 15 year mortgage, you might consider changing to a 30 year payment. You can take large lumps of cash, in North Carolina, and pay your mortgage down, without penalty, and ask that the mortgage holder recalculate your payment, based upon the new balance, and your current terms.

Can I still refinance if I don't plan on staying in this home for a long time?

If you are refinancing your current residence, you are attesting to the fact that you intend to occupy the property. Most Banks expect you to continue living in the house as an Owner Occupied situation for at least six months.

Can I still refinance if I have a second mortgage?

Having a second mortgage or equity line complicates a refinance. You will be required to have the mortgage company, holding the second to agree to it. Many times, they will not. Second mortgage holders, these days, can make you refinance both mortgages into ONE mortgage, which is considered a Cash-Out Refinance. These loans have different terms.

How can home mortgage refinancing affect my financial situation in retirement?

Every person's retirement and financial picture is like a snow flake- they are all different. In general, if you are refinancing to lower your monthly payment, and you are comfortable with that cash flow each month, it means you can grow your savings "bucket" that much quicker.

What are the risks associated with refinancing my home?

If you refinance your home into an Adjustable Rate Mortgage, and you do not sell the home, you will be facing higher payments. Mortgage Rates are going to go up. Once that starts happening, Mortgage Rates will go up with LIGHTENING speed. Therefore, waiting to see if mortgage rates are going to go back to the low 3% range to refinance could cost you a fortune.

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About The Author

Eleanor is a certified FHA Underwriter, and wrote most of the NC FHA Expert website....

Phone: 919-649-5058

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