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How energy independence home improvement loans may affect your mortgage

May 28, 2020 by Scott Sheldon

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How energy independence home improvement loans may affect your mortgage

If you’re going to be doing a refinance of your house and you have an energy Independence program that’s built into your real estate taxes- here is what you need to know.

Originally, these loans were required to be paid off because most of these programs are built into the property taxes of your mortgage, and Fannie and FHA would not allow them to be considered as eligible debts to be paid off. As a result, your ability to get financing was impacted by loan-to-value ratios and or cash to close and you had to have the financial ability to pay both the mortgages and the energy home improvement loan off.

Both Fannie Mae on conventional financing and FHA financing will both specifically allow you to finance paying off the first mortgage and paying off an energy loan that’s otherwise built into your real estate taxes. The beauty of this program is that it allows you to finance paying off the debt at the high loan-to-value that each program offers.

For example, you can have a first mortgage on your house for say $400,000 and a second at $50,000 in the form of energy and pay each debt off on a new $450,000 new mortgage going all the way up to 95% loan to value on a conventional, up to 97% loan to value on an FHA as a rate and term refinance. Here is where is particularly valuable to you as a consumer, a rate and term refinance are priced much more attractively than a cash-out refinance. So effectively you can use a rate and term refinance to fix up your house and still get rate and term financing which subsequently allows you to secure better mortgage terms.

This is something to think about if you have an energy loan built into your property taxes and you are desiring to refinance your home. One caveat here is it the debt has to get paid off. More than likely it will not be allowed to be subordinated because it’s built into the property taxes in most circumstances which have first-lien prioritization before a Fannie or  FHA mortgage does.

Looking to get a great rate on a refinance? Get a no-cost quote now.

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Filed Under: Uncategorized Tagged With: cash out refinance, conventional mortgages, home loan refinance, Santa Rosa mortgages, sonoma county refinancing

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Scott Sheldon, Senior Loan Officer
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2455 Bennett Valley Road C107
Santa Rosa, CA 95405
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Corporate Office 14511 Myford Road, Suite 100, Tustin, CA 92780. We at New American Funding take great pride in our customer service and make it our number one priority. We encourage you to contact us for complaint resolution or any post-closing questions you may have regarding the servicing of your loan. We strive to have your experience with New American Funding a stellar one. In the rare case that our service did not meet your expectations, please call our customer care hotline at 1-800- 450-2010, ext. 7100 or you may contact us by email customerservice@nafinc.com. Please leave a detailed message and we will follow up with you no later than the end of the next business day. If you are using a screen reader or other auxiliary aid and are having problems using this website, please call 800-450-2010 Ext. 7100 for assistance.

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