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The FHA has permitted streamline refinances on insured mortgages since the early 1980's. The word streamline means less documentation and underwriting by the lender and is recooped by charging a higher rate of interest on the new loan than if the borrower financed or paid the closing costs in cash. From this premium the company pays any closing costs that are incurred on the transaction. This does not mean there are no closing costs.
Companies may offer streamline refinances and include the closing costs into the new mortgage amount. This can only be done if there is sufficient equity in the property as determined by an appraisal. Streamline refinances can also be done without appraisals but the new loan amount cannot exceed what is currently owed i.e. closing costs may not be added to the new mortgage with those costs either paid in cash or through the premium rate as described above. Investment properties (properties in which the borrower does not reside in as his or her principal residence) may only be refinanced without an appraisal and thus closing costs may not be included in the new mortgage amount.
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