Mortgage Rates and Home Buyers Decline
Mortgage rates continue to decline, continuing to hover near the record lows, while the number of home buyers applying for mortgages has also dropped. Hard to imagine that rates will get lower any time soon.
The number of homeowners applying to refinance their homes has fallen modestly, however, according to the Mortgage Bankers Association. The drop of only 1.6% in refinance applications may not yet be a significant change from the upward trend of refinancing in recent weeks.
The long trend of low mortgage rates, which has lasted more than a year as the Fed keeps its borrowing rate at or near 0% is part of government efforts to re-energize home sales.
“Purchase applications are now 35% below their level of four weeks ago, as homebuyers have not yet returned to the market following the expiration of the homebuyer tax credit at the end of April,” MBA’s chief economist Michael Fratantoni said. “Although rates remained essentially flat, refinance applications dropped this past week for the first time in a month.”
A large number of homeowners have already refinanced mortgages or are unable to do so as a result of being upside down on their loans. Some homeowners have also lost their jobs, which makes it difficult to refinance without government help.
Unemployment rates in especially hard hit housing markets scattered throughout the nation has topped 21% and is critical to the real estate market.
Considerations When Planning to Refinance Your Home
Home refinancing is one of the popular and widespread choices among homeowners in today’s real estate sector. It is an alternative that most homeowners are trying to understand and avail due to its beneficial outputs and objectives. If you are one of those who are still weighing their options if refinancing is indeed the best choice to make, there are some important things you need to consider.
People refinance for a number of reasons, one of which is to get out of their present mortgage loan due to the higher interest rate they may be paying on an old loan. You may have purchased your house during a time when rates were at its peak and you are definitely suffering the consequences. On the other hand, you may also have an adjustable loan rate and you are planning to obtain and benefit from different terms that will better fit your financial budget.
There are certain criteria you must use as a basis of whether you are making a sound and accurate decision or not. Have a clear-cut picture of what you are trying to accomplish and weigh if this makes financial sense or not. A fundamental reason for refinancing is that if you are currently paying for a significantly higher interest rate. A good rule of thumb is whether you can lower your interest rate up to 2 percentage points. This 2% margin is an acceptable amount in balancing the refinancing costs of the mortgage against the necessary savings.
It must also be clear as to how long are you planning to live in the property. Home owners who are planning to relocate in less than a three years time shouldn’t refinance. Most reliable sources point out that it will actually take you about that long or longer to recoup the costs and fees you paid in the course of getting your mortgage loan refinanced. If this is the case, it is better to opt for loan modification rather than obtaining a totally new and refinanced home loan.
Another reason homeowners want to refinance is because they may have an adjustable rate mortgage. If you want to convert your adjustable rate mortgage to a fixed-rate mortgage, then refinancing is the best option for you. Another alternative is converting your current home loan to a shorter term in order to quickly buildup your home equity.
Mortgage refinancing is a good choice that works depending on your situation and the objectives you have in your investment. Careful planning and substantial education are just a few of the things you need to equip yourself and come up with the right refinancing decision.
If you have questions about refinancing your mortgage, talk to a professional mortgage loan specialist. If you have a question or comment, post it here and we’ll get answers for you. Your email address is never published on our site.
5 Things to Check Before Refinancing
Since mortgage rates have remained low, homeowners have been rushing to refinance. But before you lock in at a lower rate, here’s a checklist to make sure you’re saving money and getting the best loan for your needs.
1. Use a refinance calculator to make sure you are saving money. Calculate your break-even point to see if you’re still saving after the closing costs.
2. Check the caps before refinancing into an ARM. Bankrate has a great article about caps and floors before you refinance.
3. Evaluate various loan types, including ARMs to see if they are right for your situation.
4. Shop around for mortgage rates.
5. Check your score before refinancing, and look for ways to improve your credit score to get a better rate.
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