Mortgage refinancing applications are surging, with people like Kevin Riffit of Franklin Park jumping at the opportunity to lower monthly payments on their homes.
The boom follows a dive in mortgage interest rates, in the wake of government moves to improve the housing market.
Riffit, who had been paying about 7 percent in interest combined on an existing 30-year, fixed-rate mortgage and a home equity line of credit, was able to replace both when mortgage rates dropped into the 5 percent range during the past two weeks.
Lower rates resulted from a Federal Reserve decision to buy $600 billion in mortgage-backed securities issued by financially troubled mortgage industry giants Fannie Mae and Freddie Mac -- the two major players creating the secondary market for mortgage loans.
"Working with Roger LePage of Howard Hanna Financial, which issued my initial mortgages, I combined a credit line and mortgage into one 30-year, fixed-rate mortgage at 5.75 percent," said Riffit, who moved with his wife and three children into his North Hills home about a year ago, after transferring from the Washington, D.C., area.
A growing number of Pittsburgh-area homeowners -- many with adjustable rate mortgages -- are jumping on the refinancing bandwagon, say local real estate financing experts.
Another is Dr. Janet Lazarus, a dentist, who will be saving $150 a month after refinancing a rental house she owns on Lincoln Way in White Oak. She switched from a 30-year, fixed-rate loan at 6 percent to a 15-year, fixed-rate loan at 4.78 percent.
Kim Bell of Bell Mortgage Co. in Monroeville, who arranged the refinancing, said about 35 percent of the calls she now gets are inquiries about refinancing.
The local rush is in line with national trends.
During the week of Nov. 24, refinancing activity tripled nationwide compared to the previous week, according to the Mortgage Bankers Association. This was the largest increase in refinance applications in its 18-year survey. Refinancing activity accounted for 69.1 percent of all new mortgage applications, up from 49.3 percent the previous week.
The last refinancing "boom" started at the end of 2002 and continued until mid-2004, said Paul Juliano, senior loan officer at Omega Financial Services Inc. in Carnegie. "This time, most homeowners who are refinancing are not taking out any cash payments, but refinancing the entire mortgage," he said.
"We don't see many people taking cash out when they re-finance," said Jane Flaherty, vice president at Standard Bank in Monroeville. "What they are doing is paying off their home equity loan by combining it with their new refinanced mortgage."
Many, by refinancing, hope to shorten the term of the mortgage so they can pay it off sooner, she said. Others are using refinancing to consolidate credit card and other debt, she said.
Kevin Laird, vice president of Howard Hanna Mortgage, said about 15 percent of his company's mortgage volume now is in refinancing, and he expects it to jump to 25 percent by the end of the year.
The rate now is about 5.5 percent for a fixed-rate, 30-year mortgage, he said. Prior to the Federal Reserve action, it was 6.125 percent.
Many of Laird's clients are homeowners with adjustable rate mortgages who expect their rates will be adjusted higher in 2009 and 2010.
For a homeowner to refinance, the cost is the same as applying for a new mortgage. That includes application fees, appraisal fees, credit checks, title search and certification of employment.
Flaherty expects about half of her bank's mortgage activity for the remainder of the year will be in refinancing.
"Refinancing inquiries are for both the 30-year and 15-year fixed-rate loans. Although the monthly payments on the 15-year loan may be higher than the 30-year, the amount of interest paid over the life of the loan is much less on the 15-year," Flaherty said.
Freddie Mac said the rate on a 30-year, fixed-rate loan was 5.53 percent as of Dec. 3. Last year at this time, the rate on the loan was 5.96 percent. Rates on 15-year, fixed-rate loans averaged 5.33 percent, down from the 5.74 percent average a week ago. It was 5.65 percent a year ago.
Even lower interest rates may be forthcoming. The Treasury Department is working on a plan to subsidize 30-year, fixed-rate mortgages with rates as low as 4.5 percent.
No comments:
Post a Comment