Entries posted in August, 2010
Think refinancing your existing loan is the only way to take advantage of today’s low mortgage rates? Think again. With a little forethought and analysis, you can be sure to take full advantage by saving as much money as possible. Here are some things to think about.
1) Refinance into a shorter loan. When most people re-finance, they usually just refinance into another 30-year fixed mortgage loan. They may consider a 15-year loan, but are put off by the significant increase in monthly payments. But why not consider a 20 or 25 year fixed mortgage loan? Monthly payments may not be much more, you will save a considerable amount over the term of the loan, and you’ll own your home outright sooner. Use a mortgage calculator to figure out if a shorter term is right for you.
2) Cash-In Refinance. Many of you have heard of a “cash-out refinance” where homeowners used their home equity as a bank by taking out a larger mortgage than they owed on the loan to give them some extra cash. Well, now there is a new trend called a “cash-in refinance”. In this scenario, homeowners bring money to the closing to reduce the amount of their mortgage loan. Over 20 percent of homeowners that refinanced last quarter chose to go this route.
Why so popular? Because many people see this as the highest and best use of their money. Many people have their money parked at a bank making little interest on their money. Since their money is not working for them in a savings account, why not use the money to save some extra cash on their mortgage?
And the savings can be even more than you think. By reducing the amount of your mortgage, you may be able to get a more favorable interest rate. Here’s how:
1) By reducing the size of your mortgage, you decrease what is called the “loan to value” (LTV) amount (loan amount divided by the current value of the home). Better interest rates are available to those with lower LTV amounts (i.e. under 60% gets you a better rate than over 80%).
2) LTV’s over 80% have to pay private mortgage insurance. If you can reduce the LTV to under 80%, you don’t have to pay this additional cost.
3) Loans under $417,000 (referred to as “conforming loans”) are offered at lower interest rates. In some higher cost areas, a “conforming loan” can be as much as $729,750. Check with your lender to find out the conforming loan limits in your area.
So don’t procrastinate. If the current interest rates are at least a point under what you are currently paying (or you can reduce the rate through a cash-in refinance), the closing costs for the new loan can be recovered in a year or two, and you don’t have a move planned in the short term, you should probably re-finance. You aren’t likely to see rates this low again in your lifetime.
INFOTRAK provides local mortgage guides to help you to compare home loans and rates in your local market. Please go to www.infotrak.com/search-local-rates.html for the latest rates in your area.
You can also calculate your monthly payments with our user-friendly mortgage calculators. Go to www.infotrak.com/mortgage-calculators.html.
This week's average 30-year fixed mortgage rate was 4.42 percent with 0.7 points according to Freddie Mac’s weekly survey. This was down from 4.44 percent last week. One year ago, the average 30-year fixed rate averaged 5.12 percent.
The average 15-year fixed mortgage rate this week was 3.90 percent with an average of 0.6 points. This was down from 3.92 percent last week. One year ago, the average 15-year fixed mortgage rate was 4.56 percent.
The average 5/1 adjustable rate mortgage (ARM) was 3.56 percent with 0.6 points. This was unchanged from last week. One year ago, the average 5/1 ARM mortgage rate was 4.57 percent.
Freddie Mac’s deputy chief economist attributed the continued decline in fixed mortgage rates to investor confidence that inflation will remain in check.
Mortgage rates hit record lows yet again this week. The average 30-year fixed mortgage rate this week was 4.49 percent with 0.7 points. The average last week was 4.54 percent. One year ago, the average 30-year fixed rate was 5.22 percent.
The average 15-year fixed mortgage rate this week was 3.95 percent with an average of 0.6 points. Last week the average 15-year fixed mortgage rate was 4.00 percent. One year ago, the average 15-year fixed mortgage rate was 4.63 percent.
The average 5-year ARM also reached a record low. The average 5-year ARM was 3.63 percent with 0.6 points this week, down from 3.76 last week. One year ago, the average 5-year ARM was 4.73 percent year, the 1-year ARM averaged 4.78 percent.