Should I Refinance?
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by: marciafreeman
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Word Count: 438
Mortgage interest rates have dropped to historically low levels recently. In fact, it is rumored that the Department of Treasury may drop the rates to under 5 percent for consumers purchasing homes. There is no talk about offering those same rates to current homeowners wishing to refinance, but rates for refinance should not trail far behind. Many analysts are hopeful that low rates will kick start the real estate market. Contrarily, others believe low rates will do little to jump start the economy. Many potential home buyers are hesitant to purchase at a time when the market may not be at a low point. Marry that with increasing job loss and uneasiness about the current economy, and many buyers may not jump in spite of low rates.
Most of the news reports rally around the idea of getting potential buyers to start purchasing from the surplus of existing home inventory. But there is little discussion about current homeowners. Many consumers have mortgages in good standing and own equity in their properties. Those homeowners could benefit from lower interest rates, as many will want to stay in their homes and refinance. A refinance does not add to the already flooded inventory of unsold homes. Most people refinance to lower their monthly payments. The more money those consumers save, the more likely they are to make improvements to their homes and put money into the economy via retail and services. Any government effort to spur the real estate sector should incorporate low refinance rates. A stimulus plan that only focuses on home buyers misses a chance to encourage current homeowners to help kick start the sluggish real estate sector. Homeowners approved for a refinance usually have excellent payment histories, good credit scores and are an asset to the economy.
Many homeowners wishing to refinance are not gambling on the government dropping rates any further. A report from the Mortgage Bankers Association indicated a 200 percent increase for refinance applications the last week of November. Unfortunately, fewer applications are being approved. The problem for many homeowners looking to refinance is the decline in home values and the tightening of lending standards. Those who recently bought a property in areas that have experienced significant decreases in home values, are dismayed to learn that they now do not have the equity to qualify for a refinance. On the other hand, those who do have enough equity for a refinance, should consider locking in the low rates now. This may be a once in a lifetime opportunity.
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