30 year conventional mortgage rates are now in low 4 percent range. That really requires repeating: 30 year conventional mortgage rates are now in the low 4 percent range. When I first started in real estate full time in 1980 conventional 30 year mortgage rates were at 18.5% or HIGHER. No that was not the credit card rate it was the interest rate for mortgages. What was amazing is that people actually purchased homes and took out mortgages. It is also true that they refinanced to lower the rate and the month payment. (Generally when they refinanced they did not take any additional equity.
While we are engaged in a debate about renting versus owning, that debate is really in response to people who purchased homes who cannot afford them. People who should not have been approved for mortgages. People who could not afford to stay in the homes. People purchased on one of three assumptions: prices would go up, the property could be easily flipped, or that payments would go down. Notice that none of the assumptions assumed that they would keep the property long term. Now we are back to the world of conservative lending and common sense. In real estate jargon: we are in a market of 'sustainable ownership.' Very simply, people should purchase what they can afford to maintain over time. It is the prudent approach to home ownership. It is great advice.
For many people that raises a really good question. If you currently own a home that has an interest rate in the 5 or 6% range it probably makes sense to refinance. There are lots of important factors to consider: Is your employment situation strong? Do you plan to be in the area longer term? What is my equity situation? Do I owe more that the property is worth? What is my overall financial health like?
What is encouraging is that lower cost mortgage money is available even if you are in a negative equity situation. There are programs available that will allow you to refinance up to 125% of your homes equity. One critical note, you will need to pay back the mortgage.
Many people have real equity in their home, but have seen that amount reduced. The market has corrected so they have less equity than when they paid for the house. For some people this fact causes them to ignore a great question: Should I buy another home rather than refinance? The answer to question is family specific, that is what is 'right' for your family? If your housing needs have changed, you need a larger house, you need a smaller house, you want a lower mortgage payment, you want more land, you want a newer home, you want a townhouse, etc; then you should engage in the conversation. It may make sense, with interest rates at the lowest level in the past 50 years to make the change.
Some of my clients are concluding that the lower prices of homes, the large number of choices and the interest rates are compelling. They are making the decision to sell and purchase another home. In some instances, they are doing that although they are coming up with cash to pay off their existing mortgages. What they are doing is looking at their financial situation and the family shelter needs and making a measured, strategic decision. Yes they are selling their existing home and yes they are getting financial advice and real estate advice. They looking at the big picture and making prudent decisions.
If you are in the same place, do not hesitate to call your neighborhood Realtor for some real estate advice. I am available at 401 640 7097.
No comments:
Post a Comment