What are RefiNow and Refi Possible?

RefiNow and Refi Possible are new refinance programs available to homeowners with existing conventional mortgages owned by Fannie Mae or Freddie Mac.

They’re open to homeowners with lower-than-average incomes and higher existing debts. If you qualify, these loan options could save you as much as $1,200 to $3,000 a year in reduced monthly mortgage payments.

How do RefiNow and Refi Possible work?

Both programs have the same goal: to make it easier for people in lower-income households to refinance to a lower mortgage rate. Qualifying borrowers are guaranteed an interest rate reduction of 0.50% or more.

Fannie’s RefiNow became available on June 5, 2021, while Freddie’s Refi Possible launched in August 2021.

In a statement announcing its launch Fannie Mae senior vice-president Malloy Evans explained:

Lower-income borrowers typically refinance at a slower pace than higher-income borrowers, potentially missing an opportunity to save on housing costs. Fannie Mae’s new RefiNow option will help more homeowners refinance by removing some of those barriers, improving affordability, and promoting sustainable homeownership.

How much can you save with RefiNow or RefiPossible?

How much you can save with RefiNow or Refi Possible depends on the specifics of your financial situation and goals.

Still, the potential savings for borrowers could be huge.

If you qualify, these loan options could save you as much as $1,200 to $3,000 a year in reduced monthly mortgage payments.

Here’s an example, assuming an existing 30-year, fixed-rate mortgage (FRM) being refinanced to a new 30-year FRM.

If you haven’t refinanced for several years and you’re paying a current mortgage interest rate of 5.25% with a mortgage balance of $250,000, then your monthly mortgage payment would be $1,325.

With a refinance to a new interest rate of 3%, your monthly payment would drop to $1,071. That’s $254 less per month — or $3,048 less every year for the rest of your mortgage.

Of course, refinancing means you’re resetting the clock on your mortgage. Adding years to your mortgage means you’re also increasing the amount of interest you’ll pay in total. Every borrower will have to weigh the benefits and costs of refinancing for their specific situation.

It’s very possible that the reduction to your mortgage interest rate will more than compensate for the costs of refinancing but you’ll have to determine the best option for your finances.

RefiNow and Refi Possible eligibility

First, you need to establish whether your existing mortgage is owned by Fannie Mae or Freddie Mac.

Typically, your mortgage lender will sell your mortgage to one of the government organizations after closing, so you might not know who owns your mortgage.

Both Fannie and Freddie make this information easy to find. Fannie Mae has a mortgage lookup tool here, and Freddie Mac has one here. If you can’t find your mortgage in one, try the other.

Once you’ve established that your mortgage is owned by Fannie or Freddie, you’ll need to confirm that you meet the following eligibility requirements:

• Household income is at or below 80% of the median income for the area
• No missed mortgage payments within the past 6 months and no more than 1 missed payment within the past 12 months
• Current loan-to-value ratio of no more than 97%
• Current debt-to-income ratio of no more than 65%
• Credit score of 620 or higher

Finally, the property itself must be a single-family, one-unit property that you occupy as your primary residence. That means these refinance programs cannot be used for investment properties, vacations homes or multi-unit properties.

Shop for your best rate

The bigger the difference between your current mortgage interest rate and your new one, the more you’ll save.

When you refinance, it’s important to shop around with multiple lenders to make sure you’re getting the lowest new interest rate possible.

Request quotes from at least 3 to 5 mortgage lenders and compare them side by side. Lenders will provide Loan Estimates in a standard format that are easy to compare. Review the quoted interest rate, the annual percentage rate (APR) and the closing costs.

This simple exercise might take you a few hours but it could save you thousands of dollars.

Why did the FHFA create new low-income refinance programs?

For the past year, mortgage rates have hovered at historic lows and refinancing activity has been booming.

However, lower-income homeowners have been less able to take advantage of low interest rates.

These new programs allow homeowners who may have struggled to qualify for a refinance — or who did not have the cash on hand to do so — to benefit from low interest rates.

A lower interest rate and lower monthly mortgage payment mean more money for day-to-day living expenses, especially for homeowners who may have reduced income due to the pandemic. Refinancing may also help some homeowners avoid foreclosure by making their monthly payments more affordable.

Should you refinance with RefiNow or Refi Possible?

Both of these programs could offer significant savings for homeowners, especially those who haven’t been able to take advantage of historically low interest rates.

The specific savings available to you will depend on the details of your financial situation. A loan officer or mortgage broker can help you find the best option for you.