• Lisa Simpson
• Dec 23,2010
• In: Foreclosure

Current Market is Killing off Many Refinancing Applications of Old Loans

The lowest mortgage rates in decades are prompting many to refinance their old loans. Previously refinancing was done on the equity that always built up because property values till now always went up and never down. With the cash on the equity the borrowers indulged in luxuries or vacations. But now the idea behind refinancing is to quickly get clear of old heavy loans.

But not all are able to avail of it because the housing market is weak and lenders have become strict about regulations and conditions.

Mike and his wife Caroline Asebrook were not to be left behind. They refinanced their old loan that was for 30 years carrying an interest of 6.125% by taking a loan for 10 years carrying an interest of 3.875%. They had on the last loan 22 years left. Although they are now paying slightly more than what they paid previously ($1,200 per month) with the new loan they would be able to free the house faster. They have sliced off ten years from their loan.

The valuation of their property in Sharon Woods fell from $205,000 to $179,000 within seven years. The couple would not have been eligible for refinancing if they had not been paying excess on the old loan.

Loan officer Kitsy Burt of Charter Mortgage, Worthington said out of five applications three are successful. She aid that the most important problem is the current market value. It is this that is responsible for “killing an awful lot of loans”.

Houses that had previously been purchased for $300,000 about three to four years back could be valued at $250,000 currently. She noted that one of her clients had failed to refinance her mortgage that had interest rate of 7.5%.

The buyers who think that the price for their house is great are taken aback when they see the depressed appraisals observed Barb Wilson of Park National Bank, a mortgage lender of New York. She explained, “It probably is a good deal but maybe not for five years. It depends on when the economy turns around”.

Another instance is that of Paul Manofski who opted fro refinancing after failing to sell his house in Washington. He calculates that his new loan of 15 years carrying 3.75% will
knock off 7 or 8 years off his payment. He commented, “I’m not disappointed that I’m not able to sell. Now I’m locked into a great rate. I’m going to be there for the long haul now”.

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