Comments on: Refinance Breakeven & 4.5% Fixed Mortgages

By: Miss M

Miss M — Mon, 15 Dec 2008 20:39:06 +0000

@ Bill there is some talk of Fannie and Freddie allowing no-appraisal or so called “streamlined” refi’s for loans they already hold. Since they already hold the loan regardless, keeping homeowners in the home and paying the mortgage is more important than the appraisal.

http://underwaterhomeowner.blogspot.com/2008/12/fannie-and-freddie-might-waive.html

By: Dave Woodson

Dave Woodson — Mon, 15 Dec 2008 17:56:08 +0000

From what I understand so far this is only going to be for Purchases not Refi’s

Dave

By: Patrick

Patrick — Mon, 15 Dec 2008 16:42:48 +0000

I am going to wait and see as to whether they are still going to push the rates down for only new home buyers or people who own houses. I would get a refinance immediately if they did push it down to 4.5% though.

By: Brad

Brad — Mon, 15 Dec 2008 16:17:44 +0000

You don’t have to wait to get a great rate now. I just locked on Friday with a local bank in Iowa City, IA at a refinance rate of 4.875, $1300 total closing costs, 0 points, 30-year fixed.

The great rates are already here. Call your banks and credit unions and lock now. If your banks don’t offer less than 5%, call the ones in Iowa.

By: fivecentnickel.com

fivecentnickel.com — Mon, 15 Dec 2008 15:36:13 +0000

Steve: No-cost refis are always available. The most common ways that this works is that they either roll the costs into your mortgage such that you don’t have to bring any cash to the table, or they sell you negative points to cover the costs. This latter option is just the opposite of buying points to get a lower rate — you accept a somewhat higher than market rate in return for cash that is used to cover your closing costs.

By: jim

jim — Mon, 15 Dec 2008 15:23:06 +0000

@Steve: There definitely will be. Mortgage companies are like any other company, they go to where the money is regardless of where it is. Mortgage lenders used to make money on the front end with closing costs and the like, now they make it on the back end when they sell it to other companies.

By: Steve

Steve — Mon, 15 Dec 2008 14:50:29 +0000

I bought my first house in November 2007, with and interest rate of 6.625%. About 10 months later, I started receiving ‘junk mail’ informing me that I am eligible for an FHA streamline refinance (which reduces the amount needed for refinancing) from some companies I was not familiar with.

One offer I received said that there were no closing costs, and I would get a 6.0% interest rate. I was very skeptical, but I decided to check them out. It turned out to be legit. The only costs were I had to cough up money for escrow at closing (but my current mortgage company would reimburse me my already paid escrow a month later), and about 300 dollars of interest were tacked onto the mortgage (to account for the mortgage transition). The company I used was Primary Residential Mortgage, Inc, which is a company that owns the mortgage for a very short time, before they sell it off to a larger bank (my mortgage is now with CitiMortgage).

If mortgage rates drop to this historic low, it will be interesting to see if there are any more offers for a no closing cost, FHA streamline refinance.

By: CK

CK — Mon, 15 Dec 2008 14:48:12 +0000

The 4.5% is supposed to only be available to new loans not refis

It’s supposed to stimulate people to enter the market or step up in house. I imagine refi rates will come down somewhat if new loans are originating at 4.5% though.

Most banks will require a LTV of 80% or you’ll have to pay PMI.

By: jim

jim — Mon, 15 Dec 2008 14:44:53 +0000

@Bill: That I don’t know, if that’s a requirement for refinancing then I imagine that will stick around. Also, I believe the 4.5% mortgage loan plan is an attempt to stabilize home prices and less to help people stay in there homes.

By: Bill

Bill — Mon, 15 Dec 2008 14:40:00 +0000

Unless I’m missing something, won’t the banks still require you have to 80% LTV ratio in order to refinance? I don’t see this plan helping the people who need it most – those that are under water on their mortgage. I agree that it is an incredible incentive for those who do not yet have homes, but it doesn’t apply to the rest of us that have already bought.

By: Glenn Lasher

Glenn Lasher — Mon, 15 Dec 2008 14:03:47 +0000

We’ve lived at our current address since 2003, and got a 6.00% rate on our 30-year mortgage with moderate credit. We didn’t spend a lot on our house (less than $100k). In the immediate year or two after buying, we had a lot of offers to refi, all of which we turned down, because not one of them could get us enough savings to cover the closing and setup costs on the new mortgage.

On the other hand, as you say, 4.5% seems like a no-brainer. These other offers were more typically 5.75% or so.

Back to the first hand, I’ve estimated that payoff is within reasonable reach if we were to put our nose to the grindstone. Of course, I would want to dispatch the higher-interest debts first. Best-case scenario would be completely debt-free in 6 years, which, of course, isn’t going to happen.