With Mortgage Rates so Low More Borrowers Want to Refinance Their Homes

There are a large number of borrowers who want to refinance their homes because mortgage rates are so low. Since the government recently released a number of plans to help borrowers stay in their homes by making refinancing and/or obtaining mortgage modification easier, millions of homeowners have taken advantage and are refinancing their homes and lowering their monthly mortgage payments.

Every bit of savings helps during these tough economic times. Refinancing helps consumers put more money in their pockets which they can turn around and spend elsewhere to help jump start the economy. It’s a win win for everyone.

Benefits of Refinancing

• If you have an adjustable rate mortgage, it is much better to refinance to a fixed rate with today’s low interest rates. Depending on your mortgage amount, you may be able to save as much as $200.00 -$300.00 a month on your payment, especially if you eliminate any PMI payments.

• With lower monthly payments, you can put the money towards other family needs. It makes sense to refinance especially if your income has been reduced as a result of the economy and job cuts. You must show that you do have income to repay the monthly payments so if you do not have enough income, you will not qualify.

• Another benefit is you can shorten the mortgage term of your loan. Let’s say you had a 30 year mortgage, you may now want to apply for a 15 year.

• Take equity out of your home and have some extra cash. If you have equi8ty in your home, you may have excess cash that you can take out when you refinance and use for something else, like paying off bills or using it for college tuition.

• Eliminate your PMI payment. If your original mortgage had a PMI payment, and over the years you have paid down the mortgage balance and now have substantial equity of at least 20%, you will be able to get rid of that PMI payment.

Talk to your mortgage broker or lender today and find out if you qualify. If your interest rate can be lowered a minimum of one or two points, then refinancing is the best option for you.

However, keep in mind that there are fees to refinance. Some borrowers have discovered that the fees have increased and outweigh the benefits to them to refinance. While others have found out that their homes values have declined too much to qualify for refinancing.

The New Home Affordable Refinance Program

Here are some highlights of the recent government Home Affordable Refinance Program:

• Homeowners with debt that exceeds their home value by 5% to be eligible for refinancing.

• Eliminates prepayment penalties.

• To qualify, your loan must be backed by Fannie Mae or Freddie Mac.

The government estimates that up to 5 million homeowners could be eligible.

Who’s not eligible?

• Homeowners whose home values declined under 5%.

• Jumbo mortgages exceeding $417,000.

Borrowers must show they have enough income to afford the new mortgage payment. The new plan is estimated to help approximately 5,000,000 more homeowners. From the amount of refinance requests lenders are receiving, the plan appears to be working quite well for homeowners who are eligible.

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