Fixed-Rate vs. Adjustable Rate FHA Streamline Refinancing
Like most other kinds of FHA loans, FHA Streamline Refinancing comes in both fixed and adjustable-rate versions. Borrowers may choose to refinance their fixed-rate loan to another fixed-rate loan or an adjustable-rate loan. Likewise, a borrower can refinance an adjustable-rate loan to another adjustable-rate loan or a fixed-rate loan.
FHA Streamline Refinancing Must Result in a Net Tangible Benefit
No matter what, a borrower must demonstrate that they are getting a “net tangible benefit” out of the transaction. This means:
If you’re refinancing from a fixed-rate loan to another fixed-rate loan, this means that a borrower’s “combined” interest rate (which includes interest and MIP) needs to drop by at least 0.50% as a result of the refinance.
In contrast, if you’re refinancing from a fixed-rate to an adjustable-rate mortgage, the rate must drop by at least 2%.
And, in general, you’re refinancing from an adjustable-rate loan to another adjustable-rate loan, the rate must drop by at least 1%
However, if you’re refinancing from an adjustable-rate loan with more than 15 months remaining to a new 1-year adjustable-rate loan, the rate must drop by at least 2%