Help For People With Sub-Prime Mortgage Loans :
Sub-prime mortgage loans are adjustable rate mortgage (ARM) loans intended to provide housing solutions to customers with poor credit scores. The interest rate on these loans is low during the initial 2 to 3 years allowing the borrower to pay less towards monthly mortgage payments. However, the rates are rescheduled later depending on the market index.
The prime objective of sub-prime loans is to provide an opportunity to a credit-risky borrower to recover from his financial constraints and realize his dream of becoming a homeowner. However, this is far from being a reality. Several borrowers who have been unable to bear the rescheduled interest rates have defaulted with their monthly mortgage payments resulting in an alarmingly increased rate in foreclosures.
There are several programs initiated by the government through which borrowers can avoid a foreclosure. One such plan is Lifeline that allows the borrowers to refinance their sub-prime mortgage loans. Introduced by the Maryland’s Department of Housing and Community Development, this loan program allows the borrowers a switch over from an ARM loan to a safer and convenient fixed rate mortgage loan. Lifeline can be availed by borrowers who have taken a sub-prime loan from any approved mortgage lending firm or financial institution. Rates over these refinanced loans can be negotiated with the lender and are generally offered at a lower interest rate
However, there are certain limitations with regard to eligibility criteria of the borrower. The household income of the borrower should not be more than $126,420. Another limitation of this program is that the existing loan amount should not be more than $525,000. The interest rate on a 30-year loan under this program is fixed at 6.5 percent and on a 40-year term, the rate is fixed at 6.25 percent.
