By Fanna Haile-Selassie
ROCHESTER, MN (KTTC-TV) -- We all know by now that the economy is not doing so well, and neither is the housing market. But for those thinking about refinancing their home mortgage, you might not find a better time.
"These rates are the lowest in 37 years."
Making it a good time for many homeowners to take advantage of the low rates. But why are rates so low? Generally, interest rates decrease in a weak economy, but with the mortgage meltdown in Wall Street, the government began to buy up the loans on the secondary market. Though, there is a strategy to refinancing.
"If somebody is considering refinancing, they want to save at least 1% on their interest rate. Many of the rates in the last few years were done in the 6's, and right now, rates are anywhere in the mid 4's to the mid 5's. So it's very easy for somebody to save a percent on their interest rate, or more," explains Home Federal retail lending manager Jay Schwinefus.
Those looking into refinancing will also want to make sure the cost of the refinance is not more than the savings, but a loan officer will be able to help figure that out.
Some of the best candidates for refinancing include those who can reduce their interest rate. Homeowners who have an adjustable rate mortgage can refinance to a fixed-rate loan. And those who have been paying off a 30-year loan for a while and can refinance to a 15-year loan.
However, lending standards have become more stringent, and many who would normally use the equity in their house to get loan are suffering from the down housing market.
"It is really based on a case by case basis," says Schwinefus. "So, credit score is important, but there's a lot of things that go into the application process. So, if you have reasonable credit, haven't had a late payment in the last 12 months, it would be worth looking into."
Several banks in the area say they've been receiving a lot of requests for refinancing. Home Federal says within the past several of weeks, 80% of their loan applications were for refinancing.
Source
It is because of the little amount deposit as a downpayment plus the interest is at the low rates.
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