Sunday, March 13, 2011

Considerations of a Florida Mortgage Refinance for Investors and Property Owners

Florida mortgage refinance can be beneficial for property owners within the Sunshine State. This state has witnessed a high level of foreclosure rates which resulted in plummeting property values and left many borrowers owing more than their home is worth.

Entering into Florida mortgage refinance can help homeowners reduce monthly loan installments through the reduction of assessed interest. This can be particularly helpful to investors offering rental properties.

Many investors can no longer charge the high rental rates often associated with vacation rentals and beachfront property because of economic conditions. A large percentage of investors are now charging less than their mortgage payment in attempt to generate cash flow through investment properties.

A recent report published by industry expert, Zillow, states of the 13,000 plus homes for sale in Florida nearly one-quarter are bank owned properties. Once banks regain ownership of foreclosure real estate they often list houses for sale below market value to recover losses incurred by the repossession process.

Due to the abundance of discounted properties many Florida homeowners and investors are holding onto properties because they cannot obtain fair market value. Combined with fewer buyers and tightened lending criteria those who are buying houses often turn to bank foreclosures as a way to save money.

Refinancing real estate loans lets mortgagors obtain reduced payments so they can keep their property until market conditions improve. Reduced payments also let investors' lower rental rates without incurring a financial loss.

Multiple factors should be considered before applying for Florida refi. The first consideration is to determine current rate of interest vs. reduced rate of interest. Borrowers should be able to reduce interest by at least 1.5- to 2-percent for this to be a viable option.

Another critical element is determining if the current loan includes a prepayment penalty. This information is provided in the Truth in Lending (TIL) statement attached to loan documents. Mortgage lenders often assess penalties when borrowers' payoff loans early. This can amount to several thousand dollars.

Prepayment clauses vary by lender. Some are in place during the first 5 years. Others reduce the rate of penalty over the course of the loan. Florida property owners who obtained financing through chartered credit unions or hold VA or FHA loans are exempt from prepayment penalties.

A third consideration is the amount of refinance rates. In Florida, the average cost of mortgage refinance ranges between $2500 and $6000. This includes the cost of loan application, loan origination, real estate appraisals and inspections, legal fees, and various closing costs.

Lastly, Florida property owners must determine if they hold sufficient home equity to qualify for refinancing. Within the Sunshine State, lenders require a minimum of 5-percent accrued equity before even considering review of loan applications.

One program that can be helpful to borrowers owing more than their property is worth, but need refinancing help to reduce loan installments, is Making Home Affordable. This program is sponsored by the U.S. government and offered to mortgagors with Fannie Mae or Freddie Mac loans. Program details are provided at

It is always best to consult with a tax accountant or mortgage consultant to determine if Florida mortgage refinance is a financially-sound decision. Take time to calculate the true cost of refinancing to prevent placing personal finances and property at risk.

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