Mortgage Rate News

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With all the hoopla surrounding mortgage market news about brokers and possible tax credits, the idea of refinancing has been kind of shunted to the side. However, it is important to note that Making Home Affordable is still out there, and is available for the rest of us. Here is what Free From Broke reminds us about the Making Home Affordable refinancing program:

If you’re among the 4-5 million homeowners who have diligently paid each mortgage payment owned by Fannie Mae or Freddie Mac, but owe 80-105% of the value of your home, this governmental program can help.  The Home Affordable Refinance program runs through 2010, and can help you depending on a few different factors. This program is aimed at helping homeowners who owe more on their mortgage than what their home is worth, or for those struggling to make mortgage payments and want to take advantage of today’s lower rates.

This program is probably not for you if you have more than 5% equity in your home. This is because you can probably get your home refinanced through more conventional means.

Now is a good time to refinance

If you already have a home mortgage loan, and are not planning on buying another home, now could be a good time to refinance. Mortgage interest rates are lower than they have been for years, and you might find that you can save hundreds — or even thousands — of dollars over the life of your home mortgage loan if you refinance. It is important to realize that the current situation does not just benefit those looking to buy homes; those looking to refinance have a chance to enjoy better interest rates and save money.

If you are interested in refinancing, you might want to speak with your mortgage lender and find out what you need to do. Also, do a cost analysis to make sure that your savings over the life of your home mortgage loan will offset closing costs and other fees associated with refinancing.

This week has seen another change in mortgage interest rates and in the number of mortgage applications seen. Mortgage rates have fallen to 5.12%, reports Freddie Mac. This is on a 30-year fixed loan. The 15-year rate is 4.56%. In addition to falling mortgage rates, there has also been an increase in mortgage loan applications, reports Bloomberg:

Falling home prices and a government tax credit for first- time buyers are bolstering tepid demand. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan rose 5.6 percent to 527 in the week ended Aug. 14, the Washington-based MBA said yesterday.

Refinancing is very popular right now, as people decide to take advantage of lower mortgage rates. And, for those with FHA serviced mortgage loans, it is possible to get refinanced even with negative equity. I just received notice that my home has actually appreciated in value, and I am seriously considering a refinance. Plenty of first-time homebuyers are also finding that there are incentives to take the plunge right now. Paying points up front can even help buyers get the best possible mortgage interest rate.

Refinancing: Improve your credit score

Refinancing is a bit more difficult right now. In order to get approved for some kinds of credit, you need to have a good credit score. Many creditors and lenders have increased their credit requirements, making it difficult to get approved for loans. In order to get a good interest rate, and in order to get approval, you need to have good credit. It can take 30 to 90 days to see a substantial difference, and you may find that you need to make big changes in order to sufficiently move your credit score higher.

However, if you can buy or refinance right now, you have the chance to save a great deal of money in interest payments.

Many people are interested in refinancing their homes right. This is not a big surprise, since mortgage interest rates are at historic lows. There are some great deals out there on 30-year fixed loans — and even better deals on 15-year fixed loans.

One of the issues that comes up, however, is that of refinancing when you have a home equity line of credit or a home equity loan. You will have to figure out what to do with the HELOC. It’s not always an easy matter to resolve. When this situation comes up, you have two options:

1. Consolidate the first mortgage and the HELOC together, creating one new loan.
2. Get a subordination agreement from the HELOC lender so that you can refinance the first mortgage only.

Consolidating the HELOC and the first mortgage

It is possible, when you refinance your home, to pay off both the first and second mortgage at the same time. If you have enough equity in your home, you can pay off both home loans and just have a single mortgage at your new interest rate. Many people choose this option because it is easier to accomplish and requires less paperwork and hassle.

Subordinating your HELOC

Perhaps you have a great interest rate on your HELOC and don’t want it lumped in with your first mortgage. Or maybe you want to refinance your first mortgage only for some other reason. In this case, you need to get a suboridination agreement from your HELOC lender.

When you get loans like this, they are paid off on a first-come, first-served basis. This means that if you ran into financial trouble and went into foreclosure, the first loan gets precedence. So, your home would be sold, and the proceeds would go first to the mortgage lender and then — if anything were left over — to the HELOC lender.

Your refinance changes things around. Your first mortgage is paid off by the new lender when you refinance. This moves your second home mortgage up into first position and your refinance into position behind it. Most mortgage lenders who refinance a first mortgage want to be in first position. This means that the HELOC lender has to agree to remain in second place. Remaining in second place is what is referred to as subordination.

As you might guess, paperwork is involved when it comes to subordination. You will have to get your HELOC lender to agree to remain in second position (usually doable, since that is where your second mortgage lender is anyway). This can take two weeks or more to accomplish, so make sure you plan for this.