Is Now the Time to Refinance?

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by: marciafreeman
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Word Count: 455
Date: Sun, 22 Feb 2009 Time: 5:20 PM
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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. Although there are no rumors yet of offering those rates to those planning to refinance their homes, the consideration of such a proposal is an indication of how bad the real estate market has become. Some economists hope that lower rates and the recent drop in prices will encourage prospective buyers to purchase now, thus breathing some much needed life back into the real estate sector. Others feel that offering lower rates to prospective buyers may not provide the desired boost. 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. 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 government plan that offers extremely low rates to only buyers, however, would miss an opportunity to stimulate economic movement within the ranks of current homeowners. 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. 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. This may be a once in a lifetime opportunity.

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Information related to loans, visit www.getsmart.com/refinance.

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