|
Home >
Loans >
>
Article
|
Home Refinancing Can Create A Bind Down The Road
Staff - Mortgage Lenders Plus.com
|
Americans are getting one more cash advance from their homes. Cash-out home loan refinances this spring hit their highest market-share percentage in 16 years: 88 percent of all mortgages refinanced through Freddie Mac, the U.S. mortgage market's second-largest financier. The price of that quick cash: at least 5 percent more mortgage debt and loss of a loan that was a median 7 percent lower, Freddie Mac's figures show.
Why refinance a home mortgage when interest rates are higher? Either home owners have a serious need for immediate cash such as a new business, or they see an ARM about to reset and they want to switch into something cheaper. Re-sets are a looming issue for anyone with an adjustable-rate loan.
The numbers vary depending upon which expert is quoted, but about $500 billion in ARMs are scheduled to reset this year. Most home owners don’t want to face that readjusted mortgage and if their credit is good, they are choosing a home loan refinance despite the rising interest rates. And some consumers are biting their nails, recent research suggests. A Roper poll of 1,004 adults in May, commissioned by the consumer products firm TrueCredit.com, found 27 percent of respondents worried about meeting their mortgage payments.
Rising rates and ARMs are starting to squeeze home owners. Many financial advisors suggest that people curb spending, improve their credit standing and consider the costs and benefits when considering whether or not to refinance a home mortgage. Estimate how long it takes to break even based on your refinance costs. If you plan to stay in your home longer than that, then it's a good thing. Consolidating first and second mortgages with a home loan refinance makes sense, in that it pulls your debt into one stable monthly payment. However it results in a 30- or 25-year term, too. If the objective is to build equity fast, it may not be a smart move.
Some people already have ample equity. U.S. house values rose 57 percent in the five years ending March 30, according to the Office of Federal Housing Enterprise Oversight.
That advance, tied to the nation's housing boom, changed public attitudes about the meaning of "home." People are engaging in “financial engineering” of their housing and home loan refinance is a key element of the process.
There are people that have not only have a reset, but lots of equity. They choose to refinance a home mortgage because, “I need a new deck, or a kitchen remodel. I might as well pull some cash out and do it now.” Their wages are stagnant, but they have substantial wealth from their home. That home loan refinance is going to leave them with a larger mortgage, a longer term, and possibly a stagnant housing market.
The nation's housing boom is over; resale prices only climbed 3.7 percent in the year ending June 30, the National Association of Realtors reported. Thousands of homeowners are now left with big debts and little home equity. Research shows that resets are ahead for 24 percent of the nation's home-loan customers and 75 percent for sub-prime borrowers, who typically paid more because of poor finances or credit record. In five to seven years, people who refinance a home mortgage today will be facing resets themselves. They may not have the equity to refinance yet again.
Related Articles:
2 Questions to Ask in the Bank Refinance Scenario
While the mortgage industry has seen the emergence of all sorts of new finance companies over the last fifteen years, banks have maintained their pre-eminent role in mortgage provision.
|
Adjustable Rate Mortgages Carry Substantial Risk
There are some exotic adjustable rate mortgage loans (ARMs) available these days that are capable of jumping fifty to eighty percent when the day comes for adjustment. Interest only adjustable mortgage rates can be frightening when they are...
|
Adjustable Rate Mortgages-Can I Control The Cost?
When adjustable rate mortgages (ARMs) were first introduced, the entire notion had great shock value for the naturally conservative banking industry. Who would want a thirty year loan with interest rates that couldn’t be predicted for twenty nine of
|
Banks And The Mortgage Frenzy
Now that the feeding frenzy in the housing market seems to have abated, the financial institutions that made it all possible are looking around and wondering what they hath wrought. Interest only home loans made it possible for millions of home...
|
Better To Cut Mortgage Or Invest In Funds?
Invest the money: Take the $500 and put it in the stock market. You can make more money there than you will save in paying down your home loan. This is a golden opportunity to dollar-cost average your way into the market and to build up a tidy...
|
Calculate your Refinance Savings for a Lower Rate
Mortgage Lenders Plus has a number of refinance calculators available for different refinance scenarios. It takes a calculator to make side-by-side loan comparisons, and it also often takes a calculator to compute the true cost of a loan.
|
Efficient Refinancing: Four Tools You’ll Need
The real estate market remains an enigma to the people who get paid for analyzing it. Clearly the rapid appreciation rate of homes has slowed, in some markets halted altogether, and in a few it’s gone into reverse.
|
How To Find The Best Subprime Loan
One of the commercial aspects of today’s microeconomics is the division in the financial industry between prime mortgages and subprime mortgage loans. A good part of the reason for these categories is the explosion of credit in this country and the e
|
If You Plan To Cut Spending: Refinance & Reduce
There's no question that refinancing your home will reduce your monthly payments and reduce your income taxes. But it may not help your financial situation one bit. In fact, it may cause considerable damage to your long-term financial well-being...
|
Investment Refinance is a Game for Financially Savvy Homeowners
A substantial number of homeowners will take out home equity loans or home equity lines of credit (HELOCs) because they can be construed as “cheap money.”
|
Its A Buyers Market Lower Home Costs And Lower Interest Rates
For those of you hoping to buy a house, here’s some news that fits in the “small miracles” category. Median home prices in the United States actually dropped in the last year. In August of 2005 that number was $229,000; in August of 2006 it was...
|
Land Refinance Can be Critical to the Survival of a Business Venture
Land refinance is a little different than obtaining a new mortgage on a home. Raw land is more difficult to appraise; often there have been no comparable sales in the area that can help to establish relative value.
|
Mortgage Settlement Costs Differ From State To State
An annual survey of mortgage closing costs in the fifty states brings up some substantial differences in its 2006 edition. The survey is partial to some extent, because it does not reflect taxes, other government costs or escrow fees.
|
Mortgage Shopping? There's No Comparison
The survey shows that the pricing of mortgage fees is a shell game, with different lenders calling the same fees different things. Some lenders charge a slew of separate little fees, and others charge a few bigger...
|
Paying Ahead – A Mortgage Boon Or A Deduction Loss?
For most homebuyers, just completing the purchase is a major financial stretch. Especially in the last five years, home buying has meant exotic financing schemes that allow the home buyer to maximize the purchase and minimize the...
|
Paying Off A Mortgage Isn’t Always A Good Idea
Homeowners who have held mortgages for many years and are financially sound often consider the option of mortgage payoff. People for whom retirement is near or who are trying to develop a financial strategy for their senior years face this...
|
Refinance Fees for a Home Equity Loan Are Similar to Mortgage Fees
Refinance fees depend on what sort of refinancing effort you’re considering.
|
Refinance Foreclosures are Result of Default on the Second Loan
For purposes of this article, we are going to assume that “refinance” refers to home equity refinancing in the form of a second mortgage. A home equity loan and a home equity line of credit (HELOC) are both considered second mortgages.
|
Refinance Lenders are Busy Turning out Home Equity Loans
|
Refinance Rates are Defying the Laws of Finance
Refinance rates can refer to a couple of categories of home refinancing. The first is a complete refinance of the mortgage(s) on the home into a new mortgage.
|
Refinance Tax Deductions is what makes Second Mortgages Valuable
When people talk about taxes and home refinancing, generally they are referring to the refinance tax break that may be available if you chose to refinance the equity in your home.
|
The Popularity Of Reverse Mortgages
Reverse mortgage loans have become a mainstream financial product over the last several years. Part of the reason for this is that the FHA and HUD are doing their best to develop a framework that protects seniors who want to utilize this tool...
|
The Pros And Cons Of A Reverse Mortgage
Any senior over the age of 62 who owns a home can seek out a reverse mortgage loan. These packages provide cash to the homeowner who, presumably, has accumulated a few decades’ worth of equity. The money can be provided as monthly stipends, in....
|
What Defines An Adjustable Mortgage Rate
Until a person goes shopping for a home loan, the most he or she usually knows about the business is that there are fixed rate loans and there are adjustable rate mortgage loans (ARMs) that typically start out with a low interest rate which at some..
|
When In Debt, Don't Look For Quick Fix
When you sell the rental, you'll pay capital-gains tax on the difference between what you paid for the home (including improvements) and what you net from the sale of the home. Fortunately, federal capital-gains tax rates are at historically low...
|
|
