The government is giving certain low-income homeowners a new way to refinance their mortgages, offering an average savings from $100 to $250 per month.
The new refinancing option offers lower interest rates and monthly payments to owners of single-family homes who have a mortgage backed by Fannie Mae or Freddie Mac, and who earn no more than 80% of the median income for their area. To be eligible, borrowers must have missed no more than one payment in the previous 12 months and must meet certain other requirements, the Federal Housing Finance Agency (FHFA) said Wednesday.
The new option is intended to help low-income borrowers take advantage of historically low interest rates. In December, they dipped as low as 2.85% for a 30-year fixed-rate mortgage and fueled a refinancing frenzy. Lately, rising rates have cooled refinancing activity somewhat, but 30-year fixed loan rates were still at a relatively refi-friendly 2.98% Thursday, according to Freddie Mac.
“Last year saw a spike in refinances, but more than 2 million low-income families did not take advantage of the record low mortgage rates by refinancing,” said FHFA Director Mark Calabria in a press release. “This new refinance option is designed to help eligible borrowers who have not already refinanced save between $1,200 and $3,000 a year on their mortgage payment.”