Mortgage Loans Drop for Tenth Week in a Row
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by: marciafreeman
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Near the end of 2008, the government bought a large portion of mortgage backed securities totaling $500 billion. Since then, interest rates for mortgage loans have been shrinking. Freddie Mac starting tracking interest rates almost 30 years ago and the rates today are lower than they have ever been during that period. Falling rates are a pleasant surprise in the struggling economy, especially for potential home buyers that were shut out by inflated values during the real estate boom. The lower rates have encouraged some of those people to jump into the real estate market and take on new mortgage loans. Others are taking advantage of the low rates to refinance their current mortgage loans. As a result of the credit crisis, however, lenders have adopted much stricter lending requirements than they had just a year ago. They now require higher credit scores and more equity, which means that many who may have qualified for refinance in past years may not qualify now. Those particularly affected are homeowners whose home values have decreased significantly since they purchased their properties. They now have less equity and may not qualify for refinancing for that reason. Consumers who are considering refinancing their mortgage loans should review their credit reports and credit scores, as well as the amount of equity in their current mortgage loans.
If you are considering refinancing, begin your research by finding out what rates and terms for mortgage loans are available to you. Next, do the math to determine if a refinance is the right thing for your financial plan and budget. Most people refinance mortgage loans in order to save on their monthly payments. Calculate what the monthly savings would be for you by subtracting the estimated monthly payment under the new rate from your current payment. Then add up all the costs of the refinancing. Just like when you obtained your original mortgage, you will have bank fees, documentation and title costs, attorney fees and appraisal costs. Next, determine when you will make up the cost of the refinancing and start saving on your monthly payments (also know as when you "break even.") To calculate this, divide all the costs incurred by the refinance by what you expect to save each month under the new interest rate. The number will be given in months. If you expect to sell the house before you break even, refinancing might not be the best financial move. If you plan to own the house past that break even point, then consider refinancing. If the calculations indicate savings for you, then you too could benefit from one of the new low interest rate mortgage loans.
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