Automatic Refinance Loan

Have you ever wished your adjustable refinance mortgage would stop going up?  Or wouldn’t it be nice when the rate dropped you wouldn’t have to deal with new loan fees, an early pay off penalty, or even file another refinance application?  It sounds too good to be true but it is a realistic possibility.  If you are a homeowner considering refinancing but aren’t satisfied with current mortgage interest rates you should think about taking out an automatic refinance loan.

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Automatic refinance loans are a dream come true for many homeowners and prospective homebuyers.  Also known as reverse-rate mortgage, the loan starts with an initial rate that is also the cap rate and then declines over the life of the loan.  A small number of lenders have started offering this type of mortgage and typically when market rates drop by half a percentage point below your current rate, lenders will refinance your loan to the market level at no cost to you.

So why aren’t more homeowners jumping on the automatic refinance loan bandwagon?  Well as can be expected there are certain qualifications you must meet in order to be eligible for the loan.  Specifically, you must have a good mortgage payment record for at least one year and must maintain the same credit score that you had when you took out the original mortgage.  Another disadvantage is lenders will charge more up front in order to offset their risk.

Experts agree that you may be better off dealing with the additional fees and hassle of a conventional mortgage if you are going to stay in the home long enough to receive the savings of traditional refinance. An automatic refinance loan may have been the best choice in the late 90’s but with the market performing well and rates still at reasonably low levels, you could save the same amount or more with conventional mortgage refinancing.

Overall, the best solution may be simply to pay attention to the market and stay up to date with current rates and new refinancing options.  If interest rates increase to a certain level then an automatic refinance loan may be the better option.  But if the market continues to perform well, then a traditional refinance mortgage loan may have lower rates and save you more over the life of the loan.