An Opportunity to Re-Finance?

 

A homeowner check possible mortgage re-financing options on her laptop.A drop in mortgage rates has left many Americans wondering what to do next. Millions of Americans will most likely re-finance their mortgage loans during this tantalizing period. Homeowners and aspiring homeowners keen on getting discounts avoided their lenders for processing of their earlier requests. The opportunity to lower the mortgage rates arose from the turmoil in the financial markets resulting to a reduction in stock prices and bonds. Long-term mortgage rates, however, were as per treasury’s strategic plan which has for the first time reduced to less than 2 percent since May last year. 

According to Freddie Mac, a giant mortgage firm, the mean rates for 30-year fixed mortgages reduced to 3.97 percent. The drop to below 4 percent was unexpected because by January, the mean rate was 4.53 percent. 

The low rates come with risks, but do also have opportunities. Balancing fees and charges by the financiers are at times confusing and can shortchange firms that focus on savings. The low rates are also associated with a high risk of reduced economic growth. A slow economic growth affects the incomes of people with the mortgage loans and limits their potential to pay on time. 

The low rates below 4 percent, however, have the potential to motivate people. According to Michelle Meyer, a chief economist at the Bank of America, the low rates make people excited. Prospective buyers and mortgage bankers see the rates as favorable. Homeowners such as those in Amy Romen and Issi of Mountain View in California might take advantage of the situation and decide to re-finance. 

Amy Romen, for example, purchased Condo during the peak season of the housing boom at an approximate value of $40,000. By then the rate the adjustable rate had a starting 5.875 rate that would change after ten years. The change would see Amy Romen pay an extra $400 each month for the Condo. Issi Romen lamented on the issue and said that he expected the rates to drop. The drop in rates reminds him that it is time to re-finance the mortgage before the rates rise again.  

Before the start of last week, many borrowers, bankers and lenders were optimistic that the home loan rates would increase to an average of six percent. The assumptions were based on rumors that Federal Reserve would raise its short-term rates as from next year. The move was expected to impact the mortgage rates by increasing them. 

The assumption was, however, dealt a blow when stocks reduced from Monday till Wednesday. This was contrary to fears on global economic weaknesses due to threats of militias from the Middle East and the global spread of the deadly Ebla disease. As investors sought for safety of their hard earned dollars, they brought their money to the Treasury in large numbers. From the basic business know, high demand drives prices up, and as a result, the government bonds had to drop. 

On Wednesday, the ten year mortgage plan traded at 1.91 percent, but rose to 2.14 percent by the end of the day. The yield would have continued trading low, were it not for a stock market rally that helped revive it. The rally saw the yields increase to 2.20 percent on Friday. This was a pretty sure sign that the time to re-finance was on. 

Jonathan Smoke, an economist at Realtor.com, was quick to note that this might be the last time the rates are available. Even the slightest drops in mortgage rates can result in huge savings in the long run. According to an analysis by the Bank of America, a median priced home marked at $221,000 with a 0.5 percent rate decline can produce savings of up to $ 50 each month. Several savings are, however, needed to meet the re-financing costs. 

Researchers at Brigham University and the University of Chicago found that approximately 20 percent of eligible homeowners failed to take advantage of the momentarily drop in the rates back in 2010. They ended up costing themselves about $11,500 in feasible savings. Those who missed the rates now have a chance again. 

One economist from Quicken Loans firm, Mr. Bob Walters, said that savings made by taking advantage of such situations are crucial in re-financing. Requests for re-financing at Quicken loans increased in the past one week, but those with intentions of buying homes might not benefit. Aspiring homeowners take time budgeting and locating suitable houses in neighborhood of choice. To accomplish the two, buyers will probably take months whilst the low-rate period is just temporary. The low rates are a bonus and homeowners ought to swing into action and benefit from them.

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