Should I Refinance?
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by: marciafreeman
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Word Count: 450
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. Low rates may not be enough, when many are apprehensive due to their decreased investment portfolios and job insecurity.
Most of the news reports rally around the idea of getting potential buyers to start purchasing from the surplus of existing home inventory. There is not, however, much talk about the majority of homeowners in this country. There are plenty of homeowners that pay their mortgages and have equity in their homes. A good number of those mortgage holders would want to refinance their existing mortgages if they were offered low rates. A refinance does not add to the already flooded inventory of unsold homes. Most people refinance to lower their monthly payments. If those homeowners have more money in their pockets, they are more likely to make upgrades and spend money on other items they may not have purchased with higher mortgage payments. 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. According to the Mortgage Bankers Association, applications for refinance at the end of November had increased by 200 percent from just the week prior. Unfortunately, fewer applications are being approved. Lending standards have become more restrictive and home values have decreased, which has made it difficult for some consumers to refinance. If a consumer purchased a home at the height of the boom and then saw his house value decline, he may no longer have enough equity to be approved for the refinance. On the other hand, those who do have enough equity for a refinance, should consider locking in the low rates now. The chance at low rates may soon pass.
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