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.

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Many seniors are lamenting the hit taken to their retirement accounts and other investments. As a result, they are looking for a little extra cash to help them ride out this recession while not depleting the principal in investment accounts. One of the ways to do this is through a reverse mortgage. And, with conditions starting to improve a bit, some seniors can get a little more in terms of a reverse mortgage. Golden Gateway Financial offers this information in a recent press release:

New legislation temporarily increased the reverse mortgage limit available to homeowners in 2009 to $625,500. This means that many seniors can now extract even more equity from their home as cash in a reverse mortgage. At the same time, the latest S&P/Case-Shiller Home Prices Indices showed that home prices are once again beginning to climb. Together, these two factors have provided seniors with a short window in which they can potentially earn more from their available equity than before and more than they might be eligible for next year.

However, it is important to be careful when getting a reverse mortgage. Interest charges can be very high, as can other fees. It is also important to realize that when the house is sold, or if you no longer live in it as a primary residence, the loan has to be paid back — it is a mortgage, after all. This means that the proceeds of the sale must be used pay off the loan, or some other payment schedule must be arranged.

At any rate, before deciding on a reverse mortgage, it is important to consult with a trusted and knowledgeable advisor who can help you determine the best course of action for you. It may be that a reverse mortgage is just the thing — or you may be better served with some other financial product or service.

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Back in February, the Obama Administration revealed a foreclosure prevention plan, called Making Home Affordable. This plan is aimed at helping home owners avoid foreclosure through a combination of lower mortgage interest rates, refinancing and loan modification. Incentives for mortgage lenders and borrowers were revealed. However, the plan was mostly aimed at first home mortgages. Unfortunately, about half of the folks with at-risk first home mortgage also have second home mortgages. And nothing in the foreclosure prevention plan had much to do with this home equity loans.

So the government is introducing another plan, specifically aimed at helping reduce paymets on a second home mortgage.

A second home mortgage may have an interest rate as low as 1% under the latest foreclosure prevention measure.

Today, the Obama Administration unveiled another plan. This one is meant to help those with second home mortgages. The L.A. Times reports on the new government mortgage program:

Under the new program, the government would share lenders’ cost of reducing second-mortgage interest rates. For second-mortgage loans that amortize (those with monthly payments that include principal and interest) the loan rate would be cut to 1% for five years. For interest-only loans the rate would be cut to 2%.

The hope is that the new mortgage interest rates — resulting in lower payments — will keep home owners from defaulting on their second mortgages. This program is meant to be used alongside the Making Home Affordable program. Combined, these programs would make the overall payments owed by at-risk borrowers more affordable.

Of course, the program is voluntary, so mortgage lenders are being offered incentives to help out. One of the carrots being dangled in front of mortgage lenders, in addition to subsidies for reducing interest rates, is a one-time payment for lenders who forgive second home mortgages outright.

It’s an interesting thought, but what happens in five years when the low, low mortgage interest rates reset? While some may be in a better position to make second home (and first home) mortgage payments, many will be right back at this point.