Mortgage rates are at a 37 year historic low, and now is the time to refinance mortgage loans, but can you qualify?
Mortgage Rates at a 37 Year Low
Putting the hatchet to the key interest rate, the Fed lowered it once again on Tuesday to hover between 0% – 0.25%; but wait, there is more! CNN reports that the Fed also indicated its plan to buy mortgage backed securities, sending mortgage rates tumbling down. In a direct response to this move, an increase in home refinance loan applications is registering with lenders.
Refinance Mortgage Rate At 5.19% for a 30 Year Loan
In a related article, CNN reveals that with the rate cut, the mortgage rates for a 30-year fixed home loan fell to a 37 year low when bottoming out at 5.19%. In comparison, anyone inputting their information in a refinance mortgage calculator last week was likely to encounter rates of 5.47%. Those looking for a 15 year fixed rate mortgage are seeing rates of 4.92%; by comparison, a year ago this kind of loan cost 5.79%.
Ready to Refinance? Home Loan Operators May Not Be Standing By …
For the average homeowner this is the sweet smell of savings: refinance mortgage, take out money for the oppressing credit card bills, lower the monthly payment, and get out from under the threat of foreclosure. Not so fast!
The News Sentinel says it best when it quotes Kent Maggard of Northeast Indiana’s Fifth Third Bank who stated “Because the most fundamental interest rate set by the Fed is now zero or nearly zero, other rates don’t have much farther to fall. In other words, now isn’t the time to wait for lower interest rates.”
The unfortunate reality is that those of us who still own homes are holding on by the skin of our teeth, most likely maxed out our credit cards to pay other bills while making the home loan payments; and of course by now we have racked up a sizeable debt to income ratio. This automatically makes it virtually impossible to refinance mortgage loans at the much more favorable rates currently offered.
Moreover, those homeowners who might have used their real estate as a piggy bank in the past and pulled out equity, or who did not put down a sufficiently large chunk of money to counteract the looming devaluation of their homes, now find themselves upside down in their mortgages, and also do not need to bother standing in line for this crumb of the bailout package.
The real beneficiary from this mortgage rate low are those who are in the market to buy a home, have money saved up in the bank, steady job and credit histories, and – most importantly — do not need to make their home purchase contingent on a home sale. For the rest of us … heaven help us, because the banks with their tightened purse strings most certainly won’t.
Sources: http://money.cnn.com/2008/12/18/markets/bondcenter/credit_markets/; http://money.cnn.com/2008/12/18/real_estate/Mortgage_rates/index.htm?postversion=2008121811; http://www.news-sentinel.com/apps/pbcs.dll/article?AID=/20081218/NEWS/812180352