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Refinancing mania!

By: 14 August 2010 3 Comments

By now, just about everyone following the housing market has heard that sales have declined over the past couple of months.

That’s no surprise as people wanting to take advantage for first time and repeat home buyer tax credits had until the end of April to get houses under contract. Lawrence Yun, the chief economist for the National Association of Realtors, confirmed that pending sales fell dramatically as soon as May started and predicted that markets will struggle for a bit.

In other words, when the government quit paying people to purchase homes, sales declined. That wasn’t too hard to predict.

It’s also no surprise that buyers are in a pretty good position right now as list prices have dropped, the number of homes for sale has increased, sellers are generally more willing to negotiate than they have been in the past and interest rates are the lowest we’ve seen since the 1950s.

Those low interest rates have provided another benefit – a good number of homeowners have decided to refinance their mortgages. That seems a bit academic when you consider that mortgage rates on 30-year fixed interest loans have dropped to around 4.5 percent or better while 15-year fixed interest rates have dropped below 4 percent in a lot of cases.

According to the national Mortgage Bankers Association, 78 percent of people applying for mortgages in the last two weeks of July were interested in refinancing at lower rates. Justin Moore, president of the Mortgage Bankers Association of Arkansas, said that trend hasn’t been lost on the Natural State.

Moore said mortgage bankers in the state are seeing people refinance mortgages that have either purchases houses recently or had already refinanced not that long ago. In fact, he’s seen people refinance mortgages that are as new as 18-months-old – a lot of times, those people can come out ahead because rates have fallen that much.

Another trend is that people have moved from 30-year to 15-year mortgages. That makes a lot of sense – if someone can get a great mortgage rate, take on a payment they can afford and get out of debt a lot sooner, why not consider refinancing?

Moore said it simply won’t be worth it for some people to refinance. There are some costs associated with taking out a new mortgage, so it might not make a lot of sense to refinance if you’re planning on moving within the next year or two.

Moore said figuring out whether it’s time to refinance often requires setting up an appointment with a mortgage banker and getting a “mortgage checkup.” Quite often, those bankers are more than happy to have a look at the specific cases of homeowners and help them to decide whether refinancing is appropriate.

And, no, going to talk to a mortgage banker doesn’t mean you’ll be pressured into taking out a mortgage – you should just come away from the meeting with some good advice.

“You’ll find out if your current mortgage meets your future plans,” Moore said. “Just because you’re talking to a mortgage loan officer doesn’t mean you have to refinance.”

***

Home Sweet Home is written by Ethan C. Nobles and is distributed weekly by the Mortgage Bankers Association of Arkansas.

About: Ethan C. Nobles:
Benton resident. Rogue journalist. Recovering attorney. Email = Ethan@FirstArkansasNews.net.

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