Hurry and Refinance Before October – Here’s Why
If you are thinking about refinancing your home, here’s why you should do it before October. Acting now could save you some costly mistakes. In October, interest rates will start to rise and are expected to reach new heights, which can make your refinance cost you even more. The government is expected to taper off their stimulus plan come October 2014.
The federal stimulus plan was created to kick-start the economy after the financial crisis. Through the stimulus plan the government started buying up mortgage-backed securities. This plan was introduced to help influence private interest rates, which would encourage people to borrow money in the end. Now that the end has come, mortgage rates are expected to get much higher this fall.
Right now, all signs point to rates going up in the near future; therefore, it makes sense to refinance now before they do. If you wait, you will only end up paying a higher mortgage because you will be paying a higher interest rate.
In the outlook of the future, rising interest rates are not the only thing to worry about. Once higher rates come into play, fewer people will be able to afford to buy a new home, which ultimately means a larger inventory of homes to choose from. This will slow down the appreciation of everyone’s real estate value. And it’s the value of your home that lenders look at when you refinance your mortgage.
If you don’t have an 80% loan-to-value ratio, don’t even bother. As your home value appreciation slows down, your loan-to-value ratio will become higher and the lenders are not keen on giving mortgages if the numbers are not right.
Use your equity now while you can. You can reap the rewards from last year’s very strong home appreciation by refinancing as soon as possible. Your home may be worth more than you know. Refinancing is more appealing before the interest rates go up because in most cases you have more equity in your home, which will place your loan-to-value ratio lower.
Here’s an example: If you owe $100,000 on a $250,000 home, you can refinance the mortgage for $150,000. In an ideal situation, you could get a lower rate on your $100,000 loan and get back $50,000 to spend as you like. You can use to for your child’s college education, a new car, vacation, renovations, home improvements, and more. The best way you could spend it is by putting it back into your home in some way.
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It’s time to refinance your home before interest rates get too high. Before interest rates rise any more, you can use the Home Affordable Refinance Plan to reduce your monthly mortgage payments by thousands of dollars with super low interest rates. So, if you are looking to lower your payments, shorten the years on your mortgage or take cash equity out, now is the time.
Unknown to many people, the Home Affordable Program is geared to the middle class. If your mortgage is less than $625,000 you could qualify for the program assistance. The banks are not happy about the government making them lower your interest rate, so the program won’t last forever. Act this year to get rates as low as 3.11%. This could save you hundreds each month and thousands each year.
You can also benefit from shortening your mortgage life and save several hundred thousand, or you can take cash equity out for home improvements or a much needed vacation.
Keep-in-mind that you will still have to pay closing costs in most cases and each bank or mortgage company will have different closing costs.
If you are in the market to relocate, check out these Oklahoma communities:
Tulsa OK - located in the County of Tulsa in the northeastern section of Oklahoma. Because of the rolling green hills and wooded terrain of the Ozark foothills, it is one of the most beautiful places to live. Tulsa real estate has a pleasant climate. Residents enjoy 230 days of sunshine each year. Tulsa is proud of its low unemployment rate. Its economy is based on manufacturing, telecommunications, transportation, energy and aerospace.
Broken Arrow OK – once a rural community of ranches and farms, Broken Arrow is now a thriving city and one of Oklahoma’s fastest growing cities; a distinction it has held for over four decades. Money Magazine (2006) has named Broken Arrow real estate as one of the “Best Places To Live in America”.
Jenks OK - located in Tulsa County in the northeastern part of Oklahoma. It is a suburb of Tulsa and is situated between the Arkansas River and US Highway 75. The city has an outstanding school district, quality housing and is in close proximity to the Tulsa Metropolitan Area. The citizens maintain a small town value as Jenks real estate continues to grow and Jenks offers just plain “down home” living.
Bixby OK - located in Tulsa County, Oklahoma, just south of Tulsa. Bixby real estate offers the charm and lifestyle of a small community along with the cultural and recreational benefits of being next door to a major metropolitan area. Its nickname is “The Garden Spot of Oklahoma” because of a rich heritage.
Owasso OK – situated in Rogers and Tulsa Counties, in the northeast portion of Oklahoma, just ten minutes north of Tulsa. The City of Owasso offers a beautiful rural setting, with woodsy areas that offset business and residential zones. You can put in an eight-hour day at the office and be either out fishing on the lake or dining in the finest of restaurants within minutes. The options are plentiful for those looking for the laid back lifestyle America’s western frontier has to offer.
Homeowners are tapping into their equity once again. Over the last decade there was over $1 trillion in home equity withdrawn. Many homeowners did this through home equity lines of credit, cash-out refinances, and home equity loans. Much of that money was spent on home upgrades, flat screen TV’s, cars, and vacations. And, while there are nearly 11 million homeowners still underwater, it is not stopping home equity lines of credit from being on the rise.
The rise of home values have helped attribute to home equity lines of credit. As home values increase, homeowners will have more equity to play with. Consumer confidence has also helped homeowners feel better about repaying loans. So, because of these two factors, we have seen a 19% jump in home equity lines of credit.
Now that home prices are up by 8% since December 2012, homeowners will see a quick gain on home equity. Over 1.4 million borrowers are now above water on their mortgages. So, does this mean we will start seeing reckless home equity use again? Probably not. It’s now a little harder to pull the equity out, but those who are able to seem to be reinvesting it back into their home.
To show some actual numbers in home equity use, there was $28 billion in home equity used in 2006 and only $7.2 billion used in 2012. Of course the numbers are expected to go up in 2013 as interest rates and home values rise. However, cash-out refinances are expected to stay low. Most homeowners will turn toward home equity lines with a fixed rate. Some banks are now offering lines of credit with a fixed rate for up to 3 years. Others are still offering a variable rate.
The Home Affordable Refinance Program is now available on investment properties. As many homeowners know, you can refinance your underwater mortgage or low equity mortgage through HARP, but until recently you couldn’t refinance your investment properties under the program. Now, through HARP 2.0 and the expanded guidelines for eligibility, you will have to opportunity to refinance your second home or investment property through HARP.
There are some stipulations on using HARP for refinancing a second home. Each home must be a single unit, so single family homes and condos can qualify. Many investment properties could qualify with one to four units and you don’t have to be living in one of them as your primary residence. However, you will still have to meet the HARP criteria.
One of HARP’s main requirements is that the mortgage must be backed by Freddie Mac or Fannie Mae. You will also need to meet other income requirements like being able to prove you have at least two months reserves to refinance the home you occupy or six months reserves for your investment properties. It really doesn’t matter how much value your home has lost as long as you can make your current payments.
Now that this program expansion is available, many property investors want to know if they can refinance more than one home. Yes, you can; however, the mortgage must have originated before June 1, 2009. This will limit you to one HARP refinance per property you own.
You will also not be obligated to refinance with your current mortgage lender. You can refinance with any lender that participates in HARP. And the best news is that you no longer have to wait seven years after declaring bankruptcy or foreclosing. That requirement has been waived for the moment.
While there is no guarantee that you will get a HARP refinance, you can at least try if you are having financial trouble because of the downturn of the economy.
Foreclosure filings are at the lowest in 5 years. Finally, the wave of foreclosures around the nation is much less according to recent reports by RealtyTrac. Their reports show that there is a decline of 7% in September from August and far below one year ago of 16%. The recent report shows that foreclosures are the lowest since the fall out in 2007.
These days, foreclosures are not making headlines like they once were. However, some economists believe there could be another wave of foreclosures to hit the housing market. Since the mortgage settlement was reached in April, many experts believed the market would once again be flooded with repossessions. But, that is not the case now.
Foreclosures are down more steeply in some states over others. Part of the reason for the decline is overall economy improvement. The government and banks have also helped with their efforts to prevent foreclosures. The Home Affordable Modification Program was a big factor in getting millions of homeowners down to an affordable mortgage payment.
Banks are still a big part of the recovery as they continue to help homeowners look for ways to keep from foreclosure. Many banks are letting homeowners refinance at lower rates or they are agreeing to short sales, which is a more preferred method over foreclosure. And, the improving economy is helping more people get and keep jobs so they can pay their mortgages.
A new survey shows homeowners are open to strategic default. According to the survey, a large number of property owners see strategic default as a good option if their home continues to depreciate. Close to half the homeowners who participated in the online poll say they would walk away from their mortgage obligations if home values continue to fall. The survey was conducted online by Housing Predictor with 1,000 participants.
The Housing Predictor survey showed almost half of those surveyed would stop paying their mortgage payments even if they could afford it. Many of them believe it is best to get out from under the sinking investment. The numbers of those who would strategically default on their mortgage have risen sharply over the past year.
Other studies by the Mortgage Banker Association show that the vast media coverage that has been dedicated to the financial crises has made more homeowners aware of their equity position. Therefore, those who owe a great deal more on their mortgage than their home is worth are just walking away.
So, what would happen if you strategically default on your mortgage? You lose your home of course. The mortgage lender will take possession of your home and you will be left with bad credit from foreclosure. You should talk to a financial specialist before you consider strategically defaulting on your loan.