Some interest rates have fallen to near zero and following this trend home mortgage rates are at their lowest level in 37 years, falling to 5.19% last week. So with this good news mortgage refinance applications are surging this week also. Let's take an example and assume you had a 30-year fixed mortgage at 6.5%. Using a mortgage calculator (www.mortgagecalculator.org) your payment was $1347.00 per month (excluding taxes and PMI). By refinancing at today's rate of 5.19%, a 30-year fixed mortgage would cost $1180.00 per month (excluding taxes and PMI), for a savings of $60,120.00 (360 payments).
The new low rates we have now will likely slow foreclosures by letting homeowners lower their monthly payments and keep their homes. So with all the turmoil we've seen this year, this is a bit of good news. Let's hope that the trend to lower mortgage rates continues and we can save even more money.
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Reader Comments (Page 1 of 1)
12-27-2008 @ 3:19PM
wayne said...
OK THAT S FINE AN GOOD FOR PEOPLE WHO HAVE EQUITY IN THERE HOME.NOW WHAT ABOUT THE PEOPLE WHO ARE UP-SIDE IN THEIR MORTGAGE IS THERE ANY HELP FOR THEM TO REFIANCE TO GET A LOWER PAYMENT OR PUT THEIR FIRST AN SECOND TOGETHER FOR A LOWER PAYMENT CAN YOU ANSWER ANY OF THIS ?
12-27-2008 @ 3:20PM
Jim said...
The notion that these low rates will slow the rate of foreclosure is naive at best. THe only people who are being helped by these low rates are those who really don't need the help. You need equity, income and good credit to get the 5.19% rate. FHA will add PMI and the upfront fee, so that isn't what it appears.
Those contemplating letting their homes go into foreclosure are not in a position to be refinancing.
Too many people don't know what they are talking about wiht all this stuff - that is why we are nowhere near the bottom. Just watch and see.
12-28-2008 @ 2:08AM
Good News Economist said...
Connie,
This is going to be a massive, sustained refi boom.
Indeed this surge has now been accelerating since late November when the Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended November 28 "soared by a record 112.1%": http://mast-economy.blogspot.com/2008/12/what-went-down-must-come-up.html
Then the day after the Fed slashed fed funds rate to almost zero, mortgage brokers reported being completely swamped. "We're going to see just a massive refinancing boom," said Mark Zandi, chief economist at Moody's Economy.com, who estimates that up to 10 million U.S. borrowers will wind up refinancing their existing notes: http://mast-economy.blogspot.com/2008/12/massive-refinancing-boom-seriously.html
Glad you are picking up on this good news, looks like it will continue for the foreseeable future.
GNE
http://www.goodnewseconomist.com
2-01-2009 @ 8:02PM
Jorge said...
The trick with refinancing your home (if you are not underwater), is to make accelerated payments towards your new mortgage, instead of spending the savings! This will shave several years off your existing mortgage. If you are interested I have a detailed post on this strategy at:
http://independentminded.org/2009/02/01/the-biggest-benefit-of-refinancing-your-mortgage/