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Posts Tagged: Refinance

Rising interest rates still low by historical standards

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It's already been clear that 2017 was a banner year for residential real estate sales. But when it comes to projections for 2018 and a spring home sales season that's already underway, certain factors could cause the year to turn out quite differently.

The primary concern for 2018 is not necessarily home prices, although they continue to increase throughout much of the U.S. Instead, mortgage interest rates may well determine the outcome of the year for buyers, sellers and investors.

Mortgage Applications Spike


To ring in the new year, Americans stuck to a few familiar patterns, like pledging to lose weight and hunkering down for a long winter. But according to the Mortgage Bankers Association, they also did something unusual: They applied for mortgages in droves.

January Could Be a Great Month to Refinance

Homeowners thinking about refinancing might want to pull the trigger. 

January might be a perfect time for homeowners to get the most for their dollar for a home refinance for a variety of factors. For one, experts project that home values will continue to rise throughout 2017. Higher home values impact refinancing in a number of ways. Owners whose homes have appreciated in value can perform what is called a cash-out refinance, which allows homeowners to use some of their home's value to make improvements and additions to a house, according to The Christian Science Monitor. This will help add value to a home in the long run, the source noted.

Individuals with a Federal Housing Administration-backed loan might also be able to remove their mortgage insurance as the value of their home continues to rise. Borrowers who have 20 percent home equity or more typically don't need to pay for mortgage insurance, The Christian Science Monitor reported. Mortgage insurance adds anywhere between 0.85 percent and 1.35 percent to a borrower's monthly payment, so individuals who can get rid of insurance will likely see their monthly mortgage payments drop as well.

There are other options to refinance as well. Until September, homeowners also have the opportunity to take advantage of the Home Affordable Refinance Program, which allows people with high loan-to-value ratios to refinance without paying for mortgage insurance.

To qualify for HARP, homeowners must have a mortgage backed by Fannie Mae or Freddie Mac, and they must also have a loan-to-value ratio greater than 80 percent. Borrowers cannot have had a late payment within the last six months, and they may only have one delinquency within the past year when applying for HARP. Lastly, applicants must have a mortgage that originated before May 31, 2009, to be eligible for the program.

Borrowers should carefully consider their options and determine the best way for them to refinance in the coming months.


Why are homeowners not refinancing right now?

For homeowners wondering when to refinance, the current combination of low interest rates and unparalleled access to financing means that that the time is now. Nearly 7 million American homeowners could be eligible for a refinance in 2016, with a collective $20 billion annually on the line in potential savings — an average of $3,000 per year, per home.

"The push to refinance has become much more pressing."

This push to refinance has become much more pressing. A recent Fannie Mae's National Housing Survey reveals that the majority of homeowners believe that interest rates have gone as low as they can and are poised to rise: 55 percent believe mortgage rates will be higher 12 months from now, while 40 percent think rates will remain roughly the same.

With this sentiment, it's all the more baffling that the growing population of homeowners who could be saving money on their mortgages have not taken the steps to do so. Some, like Ben Graboske, Black Knight Data & Analytics senior vice president, attribute this to the perceived difficulty of refinancing, apprehension over closing costs or simply being unaware of the possible savings.

Refinancing to consolidate debt

A mortgage refinance is very often a smart financial decision: it can allow a homeowner to lower monthly payments, shorten their loan terms or get a lower interest rate. But did you know that refinancing can also be used to help consolidate other debt and that this could end up saving you significant money in interest?

The key is that a mortgage is considered "cheap debt". With historically low market rates, a home loan very rarely will have an interest rate of over four percent. Compare this to interest rates on credit cards and other personal loans which can range anywhere from 10 to almost 30 percent.

Through refinancing, you may be able to access the equity in your home and use this equity to pay off other debts resulting in a single, low-interest monthly payment. Better yet, the interest on mortgage payments is tax deductible. Paying off high-interest debts can also raise your credit rating.

Adjustable rate loans: An important tool for first-time homebuyers

The average homebuyer will move every seven years so why pay more for a 30-year fixed rate loan? While mortgage interest rates remain historically low, a longer term mortgage commonly results in a higher interest rate, meaning your loan ends up costing more in the long run. If you are on the hunt for a home but aren't sure that you'll be owning or occupying it for more than a decade, save yourself money and hassle and think about an adjustable-rate mortgage (or ARM).

An ARM is a mortgage product that (as the name suggests) allows the interest rate to adjust according to market rates after a set period of time. In the case of a 5-year ARM say, the initial mortgage rate of the loan remains locked in for a five year period. After the five years are over, the rate will adjust on the loan's "anniversary" every year for the next twenty-five years. It only adjusts once per year until the loan obligation is fulfilled.

Studies find baby boomers prefer to 'upsize' for retirement

Conventional wisdom has long held that when people retire, they usually want to downsize their homes due to children moving out and the desire to save money on energy bills. However, two recent surveys suggest that baby boomers are bucking this trend, preferring to stay in a similarly sized home or even upsize to a larger one.

In a recent survey conducted by Trulia, 26 percent of baby boomers (defined as people older than 55) said that they would prefer to move into a larger home, and 53 percent said that their current home was the ideal size for them. Only 21 percent said that their ideal home is smaller than the one they currently live in. For baby boomers with children, the urge to upsize was stronger, with 39 percent saying they would prefer a larger home. This may be due to the increasing number of young people moving back in with their parents due to financial constraints.

Five types of closing costs buyers should know

The last thing you want to do as a homebuyer is forget to budget for closing costs. Usually, your lender will give you a GFE (good faith estimate) of what these costs will be soon after you apply for a mortgage loan.

It can be helpful to know the different types of costs you will have to pay at closing in order to keep track of what the final amount is made up of. Here are some of the common closing costs you might pay, although your loan officer should review all the costs carefully with you:

Mortgage rates fall as credit availability increases

According to Freddie Mac, mortgage interest rates fell in the first week of March after rising throughout February. The average interest rate on a conventional 30-year fixed-rate loan fell to 3.75 percent from 3.8 percent, and the average 15-year fixed-rate loan rate fell as well, to 3.03 percent from 3.07 percent.

Len Kiefer, deputy chief economist at Freddie Mac, attributed the drop to a downward revision in GDP growth estimates for the fourth quarter of 2014 and falling consumer prices.

Remodeling market starts 2015 strong

According to the National Association of Home Builders (NAHB), the remodeling market seems to be starting out strong in 2015, with industry confidence high and remodeling rates projected to increase throughout the year.

At a recent press conference at the International Builder's Show (IBS) in Las Vegas, remodelers from the NAHB who appeared on a panel confirmed that they had high confidence in the market in 2015. NAHB projections indicate that the residential remodeling market will increase by 3 percent this year over 2014, with growth continuing into 2016.