Jan
16
Written by:
Mortgage Blog
1/16/2012 7:49 AM
As we start 2012, the housing, and mortgage, industry is in a very interesting position. Interestingly, looking back over the past several decades, many analysts believe that this year will be a great time to obtain a new mortgage. So although economic uncertainty (isn’t there always economic uncertainty?) is still present, and loan documentation requirements have increased, housing prices and low mortgage rates have made homes incredibly affordable.
Taking out a mortgage increases a borrower’s leverage, and the low interest rates are an inducement for investment property buyers. Many are taking out a loan to purchase an investment property at 4.5% and then renting out the house to earn a positive cash flow. In addition owners have the tax write-offs and other advantages of owning real estate. (Mortgage insurance isn’t an option for investment property, so a fat down payment, typically 20 percent or more, is a must.)
The low rates can make rate-and-term refinancing a smart financial move. This type of new loan is exactly what the name implies: a refinance in which the interest rate or term is changed, but the loan amount stays the same. And with rates so low, most borrowers are opting for a fixed rate loan as long as there is equity. Loans officers tell borrowers if their loan amount exceeds the home’s value, consider the Home Affordable Refinance Program, or HARP, part of the federal government’s Making Home Affordable initiative. If your loan is insured by the Federal Housing Administration, the FHA Short Refi program might enable you to refinance in a negative equity position.
So although the flashy “no money down” programs are basically gone from the mortgage business, there are still several government sponsored loans that allow borrowers to refinance at lower rates than they my currently have. Check with your lender for more details – you could be pleasantly surprised!