BRICK HOME REFORMS TO BE REFUSED FOR LESS THAN $1,100, REPURCHASE NEW LAND
REPEAT: Home renovations can be refinance at a lower interest rate than the original purchase price.
That’s the reasoning behind the Federal Housing Finance Agency’s latest ruling that homes should be considered refinancing properties for less than the purchase price when it comes to refinancing.
In its new ruling, the FHFA says a home renovation can be considered refinance when the total amount paid to the lender equals the value of the new construction.
Homeowners can refinance home loans at a rate of 25 percent for a total of $3,600, down from a 35 percent rate previously granted.
This means that a homeowner would pay about $2,800 for a home with a purchase price of $2.2 million and a refinancing cost of $1.9 million, down to $1 of interest per $1 invested.
The FHFE says refinance offers the lowest risk of default, and is the fastest way for buyers to make a down payment and get on track for their mortgage payments.
The ruling is just the latest move by the FHA to move away from the “loan to build” model that was in place when the federal government was first created in 1913.
Under the loan to build model, a borrower had to borrow money from the federal loan agency for a specific project before they could qualify for an interest rate on the loan.
Under the new ruling issued today, refinance loans are allowed to be used to finance a home’s purchase price, rather than to build a new home.
The FHFS rules also limit refinancing fees to 5 percent of the total loan amount.
The decision comes as the Federal Reserve is reviewing the economy and monetary policy.
It is expected to raise interest rates in coming weeks, according to a Reuters report.
The Federal Reserve, which was founded by President Franklin D. Roosevelt in 1913, has been reviewing how to make the U.S. financial system more resilient in the face of the economic crisis.
The Fed has been taking steps to increase transparency in the way it calculates the interest rate it uses to determine the amount of money that can be added to the economy each month.
As part of the effort, the Fed will announce next month a “living wage” for workers at the Fed, which will increase the hourly wage paid to employees by 25 percent, or $10.75 per hour, beginning July 1.