Lisa Simpson
Dec 8,2009
In: Mortgage

The Demand for Prime Mortgages has Gathered Steam

mortgages

Freddie Mac has conducted a Primary Mortgage Market Survey, according to which interest rates on loans have dipped below five per cent. This coupled with a moderation in price decline of homes has given a boost to consumer demand. In fact, demand for prime mortgages in banks has gathered steam. This was revealed by Frank Nothaft, chief economist and vice-president of Freddie Mac.
Another factor that has given a boost to housing is the extension of the credit line to 2010. This would give buyers an opportunity to buy homes at very low interest rates. For owners who have enough equity in their homes, this is the best time to take advantage of the low interest rate and refinance the existing balance of the loan.

Refinancing involves a thorough research and there are certain things to be kept in mind. The first is to consider if the homeowner will actually qualify for a refinance or not. Before that, try and find out what the value of the property is. A local agent can spell out details of what homes in the locality are selling for. After all, listed prices and present selling prices are totally different now. A homeowner can also find out if there are many foreclosures in the locality. For in an area that is flooded with foreclosures, price drops are very steep.

If there is 20 per cent equity left in a home, then the owner can take a conventional refinance. Conventional lenders will not refinance unless there is 20 per cent equity in property. Owners whose houses have a negative equity, meaning that they owe more on the loans than what the houses are worth, also have the option of refinancing under certain Federal programs. In certain cases, an owner is able to refinance even when the mortgage balance is 125 per cent of the house value.

A homeowner should try and find out the purpose behind refinance. Is it to lower the monthly payment or to reduce the term? Homeowners must prioritize before applying. Refinance fees differ so it is best to ask lenders what are the fees to be paid. Owners can also shop around to get the best deal. A home owner may brag that he has got the best deal but it is always best to chop off the years of a loan. It increases the savings in the long run.