Low mortgage rates boost refinancing applications
The Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 16, 2011 showed an increase of 2.2 percent in refinance applications over the previous week. Record low mortgage rates drove the renewed interest in refinancing.
While bad economic news has tugged consumer confidence down and created a gloomy atmosphere within the national housing market, that same news has kept mortgage rates extremely low.
HSH.com reported that interest rates on a 30-year fixed-rate home loan averaged 4.38 percent last week, a new record low rate. Rates on a 15-year fixed-rate home loan averaged 3.61 percent, while the average rate on a 5/1 ARM was just 3.08 percent.
Jumbo mortgage refinancing
Some homeowners with a loan above the conforming loan limits in their area ($417,500 in many housing markets) have been left out of the refinancing boom because interest rates on jumbo loans have often been considerably higher than conforming loans. Last week, according to the MBA, the average contract interest rate for a jumbo loan decreased to 4.55 percent.
If you have a jumbo loan and are interested in refinancing, you will need to have at least twenty percent equity to qualify for a refinance. In addition, you will need to document your income and assets and have good or excellent credit in order to meet the guidelines of lenders, which are generally higher for jumbo loans.
Homeowners with a jumbo loan may want to look into a shorter loan term, such as a 15 year fixed-rate loan or even a 5/1 ARM if they are certain to sell their property or repay the balance within the fixed-rate term. On a $600,000 loan, principal and interest payments on a 30-year fixed-rate loan would be $2,997 per month at a rate of 4.38 percent, while the payments on a 15-year home loan at 3.61 percent would be $4,322. For those willing to accept the risk of a 5/1 ARM, the monthly payments for the first five years at 3.08 percent would be $2,556.
Refinancing a mortgage at today’s low rates can be beneficial to those who have the equity and financial stability to qualify for a new home loan.
