Mortgage Tip: If Thinking About Refinancing, Do It Now!
In the course of a year, the mortgage industry has dramatically changed for the worst. Because Wall Street can no longer securitize mortgages efficiently, we have seen over 180 lenders go out of business and over 100,000 layoffs in the industry. It’s so bad, that even the strongest lenders are at the brink of failure.
Needless to say, this has negatively impacted the mortgage choices once available to home owners. Home owners looking to refinance now will find only a fraction of the programs that were once available to them. Many will not be able to refinance at all.
Now is not the time for procrastination. If you have decided to refinance, you are probably better off doing it right now. If you wait, only more lenders will go out of business and more mortgage programs taken off the shelf. It will be more difficult to qualify for any mortgage programs that are left.
Additionally, home values are falling daily. By waiting, the collateral used for the refinance will be worth less than today. This will affect the over all terms a borrower can get on the refinanced mortgage. Generally speaking, the higher the loan to value, the worse the terms. Value drops can be to the extent that PMI, or private mortgage insurance, could be necessary. Or worse, they can drop to the point where a refinance is no longer possible under any circumstances.
Even though the current interest rate environment might coerce home owners to wait for the coming lower rates, the value being lost in their homes can offset any benefit lower rates offer. If you get a rate that is a percentage point lower than today’s rate, but you have to take out PMI because your value dropped, what good is that? The cost for the PMI can more than offset the lower interest rate.
Besides, conventional rates are very attractive right now. It’s possible to get a sub 6% thirty year fixed rate mortgage as I write this. Fifteen year fixed rates are even lower. These are attractive rates by any standard.
The risk of not having viable refinancing options is too great. If you have a sensible loan scenario awaiting your approval, take advantage of it right now, while you still have equity and the mortgage programs still exist. If you are even thinking about doing anything with your mortgage in the next year or so, I encourage you to look at your options right now as you may not have them later.
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