Burdened by a high interest Utah Housing FHA loan?
If you have a Utah Housing Loan, then you carry two mortgages: a first mortgage (in most cases an FHA loan) and a second mortgage that covered your down payment requirement.
Utah Housing Loans are ok(ish) loans to start with if you simply have no other options for the minimum down payment. As is, they’re extremely difficult to refinance out of. And there is a reason for it: Utah Housing wants you to keep paying the high interest on that first mortgage, and uses the second mortgage as a rope to tie you down.
The challenge with refinancing a Utah Housing mortgage
The easiest, fastest and refinances are called FHA streamlines – they don’t penalize you for your credit rating, they don’t require proof of income, and they don’t care if your home value is underwater.
An FHA Streamline will only refinance your main mortgage loan – which is the first mortgage. The second mortgage could stay in place as long as it agrees to subordinate to the first. But this is where Utah Housing says “naah!” – their second mortgage does not subordinate to any other lender.
Utah Housing has no incentive to subordinate the second because it is collecting interest from both mortgages, and the bigger chunk comes from the primary loan. Most of the times they have you right where they want you. Refinancing both mortgages with a different lender is usually a challenge because of the lack of required equity (since you didn’t actually make a down payment, and home values have been slow to rise in the past few years).
How to refinance your Utah Housing FHA Loan?
The easiest choice would obviously be to pay off the second mortgage and take it out of play. But not everyone has a few thousand dollars just lying around in their bank account. So you’re left with two other options:
1. Talk to your local credit union about refinancing your second mortgage with them.
Both America First Credit Union and Mountain America Credit Union offer home equity lines of credit up to 100% of your home value, at a probably lower rate than what you have now. Best of all, they will play nice and agree to subordinate when I get your FHA Streamline Refinance going.
2. Consider a refinance to a Conventional mortgage if you believe you have at least 5% equity in your home. An appraisal of the property will be required and your credit history and debts will be considered.
The idea is to consolidate the two mortgages in one, with a maximum loan to value of 95% (meaning the new appraisal will have to prove the existence of at least 5% equity). Such a high loan to value is allowed because your second mortgage was acquired at the same time with the first – it is called a “purchase money second”. The refinance will be considered a rate-and-term refinance, and not a cash-out (which would require a maximum LTV of 85%).
Stop giving away your hard earned money, and put Utah Housing on the naughty list this year. Call or text me at (801) 473-3154 to assess your options.
Apply now to get started.
