The most recent reports we have in the area of refinancing indicate that homeowners are increasing their refinance activity, which many feel to be the result of continued low rates on home loans that, despite some increases, are still incredibly affordable for homeowners who qualify for these lower rates when they refinanced their home loan. Yet, homeowners are obviously in a position where they want to either find a lower payment, lower overall home loan costs on their mortgage, or a combination of both, yet when it comes to refinancing officials often caution homeowners to make sure they fully understand the total costs of doing so and look at whether it will be beneficial for their situation.
The housing market has seen low prices and rates over the past months, which many feel to be a beneficial environment for homebuyers and, thanks to low rates, many homeowners could potentially stand to refinance for much more affordability in terms of their interest rate payments. Understandably though, negative equity has been a problem for some homeowners and, as a result of recent changes in the federal Home Affordable Refinance Program, it’s hoped that more individuals will be able to take advantage of lower rates but this program will not help all homeowners in negative equity situation refinance.
However, recent news from the Mortgage Bankers Association did indicate that the refinance index did increase, but homeowners who are considering refinancing their home loan are often able to most benefit from this action if they have looked at what costs will rise, whether they will qualify for a substantially lower rate, and whether all these factors together will lead to more affordability or help them meet their mortgage refinancing goals.
As an example, homeowners who may refinance in the hopes of getting a lower rate and mortgage payment might be in a position where the reduction in their rate and payment may be minimal or benefits from these reductions offset by costs that come from fees when refinancing, or there are some homeowners whose rate may not drop by any significant amount during refinancing, and this would obviously be a situation where homeowners stand to lose rather than gain from refinancing their mortgage. Obviously, this is usually common sense when it comes to homeowners who are looking into refinancing, but officials are still cautioning homeowners as some see these low rates currently in place and feel that now would be the best time to refinance for more affordable payments or overall costs.
While homeowners are also urged to look at different types of mortgage terms, as shorter mortgage terms could obviously lead to lower overall payments, the factors that must also be weighed are once again costs, the rate reduction that a homeowner will receive, and how a particular homeowner’s financial position may impact their ability to see affordability through refinancing. While it’s hoped that home loan applications will continue to increase, which would help absorb homes that are sitting empty in the housing market and may point to a positive sign in terms of consumers being able to afford a mortgage, homeowners who are currently looking to simply refinance do still need to weigh the pros and cons of doing so in light of their particular financial position and goals for what they want to achieve if they do refinance their mortgage.