Portland Metro/Tigard Real Estate News

In this forum we will offer discussions on a wide variety of subjects, but focus on Portland Metro and real estate. Hopefully our insights and experiences will inform, educate, challenge and entertain our readers week after week.

Friday, January 2, 2009

Refinancing Frenzy

Interest rates have fallen recently, as most people are aware, and naturally people are rushing to refinance in order to reduce their housing payments.

The average rate for a 30-year, fixed mortgage dropped to 5.08% last week, according to the Mortgage Bankers Association, more than a full point lower than just a month ago.

Mortgage applications were up 48% last week, and by far, the majority of those were from homeowners looking to lower housing costs.

Refinancing is not for everyone however. If you currently have an adjustable rate, you could lower your rate by a percentage point or more, you do not plan on selling soon and/or you have significant equity then you should certainly look into getting a new home loan.

Those with an adjustable rate can save themselves a lot of trouble by turning it into a fixed rate while it is low so that future rate increases won't jeopardized their lifestyle.

Getting a lower rate is a really good idea but because of the fees and costs associated with a new loan, it really is only worth it if you are lowering your rate by a whole percentage point or more.

The balance of your loan will increase when you refinance and paying off the new extra will take a year or two, so it won't be so helpful if you plan on selling before then.

Some people lost much or all of their equity when home values fell. If your equity has fallen below 20% of the total appraised home value, the borrower will likely have to purchase private mortgage insurance. The insurance adds a point or two to the monthly mortgage costs erasing any advantage of refinancing.



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