But those who need to do it most may be out of luck
By NANCY SARNOFF
Tessa and Todd Ward's timing couldn't have been better.
In 2004, the couple took out an adjustable-rate mortgage that would reset in five years to buy a house in Southampton, an upscale neighborhood near Rice University.
Now, on the eve of their first rate adjustment, interest rates are at record lows. So the Wards are refinancing into a fixed-rate mortgage at below 5 percent. And they're reducing the length of their loan so they can pay it off sooner.
"We'll be saving money in the long run," Tessa Ward said.
Historically low interest rates are fueling a mortgage refinance boom, as scores of Houstonians rush to their lenders to lock in the lower rates.
Recent interest rates for refinancing a mortgage have hovered between 4.75 percent and 5.25 percent for a 30-year fixed-rate loan if the borrower has good credit and at least 10 percent equity in the property, said Owen Raun of RMC Vanguard Mortgage Corp. in Houston.
"The industry has gone from famine to feast," he said.
Banks and mortgage lenders are reporting spikes in refinancing activity from homeowners hoping to shrink their monthly payments and trade in unpredictable ARMs for fixed-rate loans. According to a national Mortgage Bankers Association refinance index, applications were up more than 60 percent for the week ending Dec. 19 over the previous week.
Compass Bank said its volume of refinance applications is nearly double what it was a month ago.
"We're pedaling as fast as we can," said Jon Mulkin, president of the bank's mortgage division.
During the holidays, "we usually have a much thinner staff, but we're working overtime and weekends to do whatever we can to help these customers," he said.
JPMorgan Chase reported refinance applications rose threefold since early November, with bumps coming in early December and more than a week ago after news about interest rate reductions. And Candace Maree Jones of Houston-based Envoy Mortgage said the company's refinances doubled, this month.
"This has tremendously helped our business," she said.
Problems with credit
While those with good credit are reaping the benefits of the lower rates, the ability to refinance is still not an option for some, especially those who may need it most.
Property values in certain outlying neighborhoods have fallen, and owners could owe more on their homes than they're now worth, said Charlie Houssiere of Secure Mortgage Company in Houston.
Credit can be another complication.
People who have lost jobs are cutting back and might have missed or been late on a mortgage payment, Houssiere said.
And in today's tighter credit environment, lenders don't look kindly on financially blemished borrowers.
"The people that really need to refinance are not being able to because of credit issues," he said.
Cost to refinance varies
Mortgage rates have been falling since November when the Federal Reserve Bank said it would invest up to $600 billion in debt and mortgage-backed securities and then this month lowered its benchmark interest rate to zero.
Like the Wards, many consumers facing higher interest payments are taking advantage of what they see as a window of opportunity.
Drew and Megan Morris have an adjustable-rate mortgage with a 5 percent interest rate that expires in 2011.
At the end of the month, they'll close on a 30-year fixed-rate loan at 4.875 percent.
The couple will save more than $200 a month, which will allow them to recoup their closing costs in about two years.
"We just couldn't pass up the low rates," said Drew Morris, a commercial real estate broker. "We were concerned that 2011 rates would be a lot higher."
The cost to refinance a mortgage typically varies from 2 percent to 3 percent of the loan, depending on its size, experts said. So it's only worthwhile for those planning to stay in the home long enough to regain those costs.
'Effortless' transaction
In addition to refinances, some lenders also are reporting an uptick in new mortgages.
The Mortgage Bankers Association said its Market Composite Index, a measure of loan application volume, jumped 48 percent week-over-week on a seasonally adjusted basis for the week ending Dec. 19.
The 30-year fixed-rate mortgage averaged 5.14 percent for the week ending Dec. 24, down from 5.19 percent the previous week, according to Freddie Mac. Last year at this time, the average rate was 6.17 percent.
Alyssa Caveness closed Oct. 30 on her first home, a 1,200-square-foot townhouse in Shady Acres. And though she may have been able to get a lower interest rate if she had waited, she's happy with her 6 percent FHA mortgage.
She was surprised at how easy the transaction was.
"I've heard nothing but horror stories of how awful it is and you have to give everything short of a blood sample," said Caveness, 32. "It was effortless."
Still, Eric Houston of 1st Alliance Mortgage said a lot of would-be buyers are waiting for rates to get even lower.
The Treasury Department is considering a plan that would help reduce mortgage interest rates to 4.5 percent, with the hope of luring people back into the housing market.
"I think the best rates you're going to see are dangling right now," Houston said.
nancy.sarnoff@chron.com
Source
The couple was lucky to be able to avail of the low interest rates.
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