More than 75 percent of mortgage loan applications in the US on 1 August came from homeowners hoping to refinance their loans, up from 60 percent in the spring, according to the Mortgage Bankers Association (MBA).
Refinancing even an average-priced home under the lowest rates is a positive side-effect of the economic crisis and can save a homeowner hundreds of dollars monthly. However, many mortgage lenders require borrowers to have at least 20 percent equity in the homes, or they would have to pour in more money in order to hit the 20 percent mark, which many borrowers are willing to do, said Camille Brannon, a closing attorney and partner at Campbell & Brannon.
“That is something they have never done before,” Brannon said. “But for some people, these interest rates are worth it. If for example, they have a US$500,000 loan and the property didn’t appraise enough to support the loan, they will bring in US$50,000.”
According to Bankrate.com, an owner with a 30-year loan of US$150,000 at five percent interest will pay around US$805.27 a month. With low interest rates at 4.25 percent, the owner saves as much as US$808 a year or US$24,240 over the life of the loan.
Meanwhile, those who want a 15-year loan can get even better rates. Closing attorneys are expecting another rush of refinancing with this week’s drop in rates.
“Refinancing has been subdued for the last four of five months because of tougher lending standards and appraisal issues,” said Marietta attorney Ken Chalker Jr.
“But now that rates have hit bottom again, I expect refinancing to be picking up significantly. These rates are going to get people back off the fence,” he said.
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