CASH-OUT refinancing, in which borrowers pull out equity from their homes to finance everything from vacations to sports cars, were all the rage during the housing boom.
Now, as the nation continues to endure the slow, painful correction of that boom, another trend may be emerging: cash-in refinancing. In this case, borrowers put extra money into a transaction to obtain cheaper loans and pay down debts.
According to Freddie Mac, the government-sponsored entity that, along with Fannie Mae, helps set lending standards, 22 percent of homeowners who refinanced their mortgages in the second quarter of this year paid additional money at the closing to lower their principal balance. That ties the record for the third-highest “cash-in” refinancing — set in the fourth quarter of 2002 — since Freddie Mac began recording such transactions in 1985. The highest level was in the fourth quarter of 2009, with 36 percent of refinancing homeowners cashing in.
Freddie Mac’s chief economist, Frank Nothaft, linked the change to low interest rates on cash-equivalent investments like certificates of deposit. Consumers are finding that they can save more money on monthly interest payments by paying down their mortgages than by leaving their cash in banks, which are offering meager interest rates.
Indeed, mortgage industry executives said they had heard borrowers express such motives when choosing a cash-in refinancing strategy. But they said borrowers were also looking to qualify for a cheaper loan. Often, the more equity they have in their homes, the easier it is for them to qualify for certain loans and for lower interest rates.
Michael Moskowitz, the chief executive of Equity Now, a lender based in Manhattan, said that over the past year he had seen more borrowers add money to their mortgage refinancings with the aim of lifting equity levels high enough to qualify for a lower monthly payment.
วันเสาร์ที่ 14 สิงหาคม พ.ศ. 2553
Mortgage group spent $1.09M in 2nd-qtr lobbying
The Mortgage Insurance Companies of America spent $1.09 million to lobby the federal government on housing and other issues in the second quarter, according to a disclosure report.
That's up from the $670,000 that the trade group spent in the year-ago period, and about even with the $1.06 million it spent in the first quarter of this year.
The Mortgage Insurance Companies of America is the trade association representing the private mortgage insurance industry. Private mortgage insurance protects a lender against losses when a borrower defaults.
During the April-June period, the trade group lobbied the federal government on legislation related to the restructuring of government-sponsored enterprises such as Fannie Mae and Freddie Mac, according to the report filed on July 20.
The group also lobbied on appropriations for housing and insurance issues involving the Department of Transportation and the Department of Housing and Urban Development; mortgage insurance taxes; the Restoring American Financial Stability Act; and, provisions relating to mortgage insurance in the financial regulatory bill signed by President Barack Obama last month.
That bill included new funds to aid homeowners, including $1 billion for a new program being run by HUD to provide homeowners with emergency zero-interest rate loans of up to $50,000 for up to two years.
In the second quarter, the group lobbied the House of Representatives and the U.S. Senate, according to the report filed with the House clerk's office.
That's up from the $670,000 that the trade group spent in the year-ago period, and about even with the $1.06 million it spent in the first quarter of this year.
The Mortgage Insurance Companies of America is the trade association representing the private mortgage insurance industry. Private mortgage insurance protects a lender against losses when a borrower defaults.
During the April-June period, the trade group lobbied the federal government on legislation related to the restructuring of government-sponsored enterprises such as Fannie Mae and Freddie Mac, according to the report filed on July 20.
The group also lobbied on appropriations for housing and insurance issues involving the Department of Transportation and the Department of Housing and Urban Development; mortgage insurance taxes; the Restoring American Financial Stability Act; and, provisions relating to mortgage insurance in the financial regulatory bill signed by President Barack Obama last month.
That bill included new funds to aid homeowners, including $1 billion for a new program being run by HUD to provide homeowners with emergency zero-interest rate loans of up to $50,000 for up to two years.
In the second quarter, the group lobbied the House of Representatives and the U.S. Senate, according to the report filed with the House clerk's office.
How to get a better rate on your mortgage
Mortgages are often one of the largest expenditures a household has. Such being the case, it makes sense to find ways to get a better rate on mortgage loans. Fortunately, several methods exist to obtain lower rates or at least work toward the goal of lower rates. The following techniques can be used toward obtaining a better rate on a mortgage.
• Mortgage Duration
Switching from a 30 year mortgage loan to a 20 or 15 year mortgage can also get you a better interest rate. This is because the lender will recover its money faster which in effect lowers its lending risk and lowering the rate. If a shorter-term mortgage is affordable, it can lead to a much faster payment of the principal value of the mortgage, and lessen overall loan cost significantly.
• Equity value
Increases in equity value, be they through market appreciation or extra payments into a mortgage can also lower lending risk. By having more value in a home, your chances of getting a better rate on your mortgage increases. This method is more likely to work if mortgage rates are steady or declining, as otherwise, the higher equity value is working against an increasing mortgage rate trend.
• PMI Insurance
Property Mortgage Insurance (PMI) is usually required on loans that have less than 20% of the total loan amount paid off. By surpassing this 20% requirement, PMI can be dropped leading to a lower monthly cost of the mortgage where PMI is included in the interest rate calculation. PMI can be lowered by making extra payments or by adding a down-payment on a refinance.
• Credit rating
A better credit rating usually leads to better interest rates so it follows a higher credit rating can lead to a better rate on a mortgage loan. If your credit rating isn't as high as it could be, it could be higher within a few months if basic, yet important steps are taken to rebuild credit rating.
• Refinance
Even with the same credit rating it may be possible to refinance at a lower rate if aggregate mortgage loan rates have moved down from the rate at which you originally financed your real estate. A refinance that drops Annual Percentage Yield (APY) 1% or more could be enough to cover any extra fees related to the refinance in addition to lowering total interest paid.
To get a better rate on a mortgage loan more than one of the above techniques may be used. This has the affect of compounding the value of the lower interest rate. For example, a home that is refinanced at a rate 1% lower than the original mortgage that is also reduced in duration by 5 years and has a down-payment that puts that principal higher than 20% lowers the interest in three ways. The total decline in interest rate may then, be higher than the original 1% lower refinance rate.
• Mortgage Duration
Switching from a 30 year mortgage loan to a 20 or 15 year mortgage can also get you a better interest rate. This is because the lender will recover its money faster which in effect lowers its lending risk and lowering the rate. If a shorter-term mortgage is affordable, it can lead to a much faster payment of the principal value of the mortgage, and lessen overall loan cost significantly.
• Equity value
Increases in equity value, be they through market appreciation or extra payments into a mortgage can also lower lending risk. By having more value in a home, your chances of getting a better rate on your mortgage increases. This method is more likely to work if mortgage rates are steady or declining, as otherwise, the higher equity value is working against an increasing mortgage rate trend.
• PMI Insurance
Property Mortgage Insurance (PMI) is usually required on loans that have less than 20% of the total loan amount paid off. By surpassing this 20% requirement, PMI can be dropped leading to a lower monthly cost of the mortgage where PMI is included in the interest rate calculation. PMI can be lowered by making extra payments or by adding a down-payment on a refinance.
• Credit rating
A better credit rating usually leads to better interest rates so it follows a higher credit rating can lead to a better rate on a mortgage loan. If your credit rating isn't as high as it could be, it could be higher within a few months if basic, yet important steps are taken to rebuild credit rating.
• Refinance
Even with the same credit rating it may be possible to refinance at a lower rate if aggregate mortgage loan rates have moved down from the rate at which you originally financed your real estate. A refinance that drops Annual Percentage Yield (APY) 1% or more could be enough to cover any extra fees related to the refinance in addition to lowering total interest paid.
To get a better rate on a mortgage loan more than one of the above techniques may be used. This has the affect of compounding the value of the lower interest rate. For example, a home that is refinanced at a rate 1% lower than the original mortgage that is also reduced in duration by 5 years and has a down-payment that puts that principal higher than 20% lowers the interest in three ways. The total decline in interest rate may then, be higher than the original 1% lower refinance rate.
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