Source: By Roddie Burris, The State, Columbia, S.C.) ? Mortgage rates have been hitting all-time lows in recent weeks, making it cheaper than ever to borrow money for a house.
That hasn?t sparked a run on real estate in an economy that can?t seem to find its way back to recovery. But it does have Midlands? homeowners rushing to refinance ? either to save money on their monthly payments or to shave years off their loans.
David Hyatt, senior vice president of Midland Mortgage Corp., said he has seen business triple in the past month as rates have dipped as low at 4.15 percent for a 30-year, fixed-rate mortgage and 3.6 percent for a 15-year, fixed-rate mortgage, a popular refinancing option.
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?We?re pretty busy right now,? said Hyatt. ?Many of our clients are coming in and saying they never thought they?d be refinancing again. But the rates are so low.?
Despite the ultra-low rates, the rush to refinance likely will be tempered because rates have been low for several years, said Bob Graybill, owner of Gulfstream Mortgage Corp. in Forest Acres. Rates dipped to about 4.25 percent for a 30-year mortgage two years ago, spurring many homeowners to lock in low rates then.
?At that point, you had more people out there in the market who had higher rates and were more primed to refinance,? Graybill said. ?Now, it?s probably not quite as crazy because people have lower rates in general.?
Still, Graybill said he has seen his business double in recent weeks as rates have fallen.
Homeowners should have plenty of opportunities ? through the end of next year ? to refinance or lock in a low rate on a new home. The Federal Reserve recently announced plans to hold its interest rates at practically zero through 2013 in a bid to help jump-start the stalled U.S. economy.
A homeowner who bought a house even five or six years ago likely can save money now by refinancing, industry professionals said.
?If you can cut your mortgage rate by 1.5 (percentage points by refinancing), it would probably do you good,? Hyatt said. ?If you can cut your rate by 2 (percentage points), it?s a no-brainer.?
While some have complained of tight credit, loans are available, the experts say.
Interest rates will vary for each consumer, based on an array of factors. Some lenders are willing to go even lower than the going rates if buyers are willing to ?buy down? points with upfront fees.
Credit scores also are a factor. Consumers in most cases must have a 620 credit score or better to qualify to refinance, but those with excellent credit will get the best rates. And consumers who are refinancing must have equity in the house and pay an upfront cost for the transaction, industry experts said.
The ultra-low rates have many homeowners abandoning 30-year mortgages, opting instead for a 10-year or 15-year mortgage contract.
A fixed-rate mortgage for 15 years goes for about 3.6 percent, but reports say aggressive quotes can go as low as 3.3 percent.
By going to the shorter-term mortgage at the lower rates, customers cut the remaining time on their loans, cut the interest they must pay, and if they?re lucky, end up paying roughly the same amount for their monthly note.
A homeowner who bought a home five years ago for $150,000 with a 6 percent, 30-year, fixed-rate mortgage would be making monthly payments of $900, Hyatt said. Refinancing into a 15-year loan at 3.5 percent would add about $170 to the monthly payment but would shave more than a decade of payments off the loan. That same homeowner could save $185 a month by opting for another 30-year mortgage, Hyatt said.
?It is absolutely an environment where (refinancing) makes sense,? Graybill said.
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(c)2011 The State (Columbia, S.C.)
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A service of YellowBrix, Inc. Publication date: 2011-08-24
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