What Is a Streamline Mortgage?

Mary McMahon
Mary McMahon

A streamline mortgage is a refinancing option for homeowners holding insured mortgages in good standing who want to lower their interest rates and monthly payments. The borrower can take out a new mortgage with reduced paperwork to speed the refinancing process and get access to a loan with better terms as quickly as possible. This is only an option for certain borrowers. Homeowners considering refinancing can check with a financial institution or mortgage broker to see if they qualify for a streamline mortgage.

Mortgages may be refinanced by borrowers who are in good standing to lower interest rates.
Mortgages may be refinanced by borrowers who are in good standing to lower interest rates.

The first criteria for qualification is that the loan must be insured through an agency like the Veterans Administration or Federal Housing Administration. The borrower needs at least 12 months of history on the loan and must be current with payments. If the loan is new, the borrower is defaulting, or there is a history of late payments, a streamline mortgage is not an option. Borrowers also cannot get cash out on the refinancing; they can only finance to lower expenses.

A lender does not conduct a credit check for a streamline mortgage.
A lender does not conduct a credit check for a streamline mortgage.

With a streamline mortgage, the lender does not conduct a credit check or request an appraisal of the property. The new loan is based on the outstanding value of the old loan. The lender will make sure the borrower is still in good standing on the loan but will be able to offer refinancing to unemployed borrowers as well as those with bad credit. Borrowers attempting to juggle finances to address a change in circumstances can benefit from a streamline mortgage because the process is fast, and the borrower won't be rejected on the basis of bad credit.

Some lenders may offer a no-fee mortgage, where the costs for closing are bundled into the new loan. This can be an appealing option for borrowers who do not have cash available to cover these costs. It is important to be aware that the lender builds the costs into the interest fees, and the borrower will end up paying them in the long term. It may be cheaper to pay the costs up front than to accept them as part of the interest payments on the loan.

Interest rates available with a streamline mortgage vary, depending on the economic climate and the lender. Borrowers may be able to pay points to lower interest. The goal of refinancing is typically to lower interest and create smaller monthly payments, and borrowers should make sure any interest offers are competitive with the existing loan. Even a quarter of a percentage point can make a big difference when borrowers are paying interest on a big mortgage, and borrowers can use a mortgage calculator to see how much they will save with the refinance.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a wiseGEEK researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

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