Just because the mortgage rates are at record lows right now doesn’t mean the U.S. housing market is getting any better. Because the real estate market is so slow, and mortgage rates have gone down considerably, the majority are more able to discover opportunities in the market. Since prices of homes are as low as mortgage rates are, short term losses are taken by many for the gains that come with a lower interest rate. The majority are losing their homes, but coming out ahead with what they get instead. Numerous feel comfortable spending money to refinance the mortgages they have.
Mortgage rates at record lows with a poor housing market
With the U.S. housing market in the toilet, the Wall Street Journal reports that economists say trading up to new homes or refinancing existing ones can make good financial sense — even if it means giving up cash to get out of an underwater mortgage. By writing a big check to retire an old mortgage, individuals living in less-desirable neighborhoods might be able to find much better homes in a location where the home’s value will appreciate more. Everybody can afford larger homes with all the mortgage rates so low.
Cash in or cash out with your refinancing
Typically, people refinance to “cash out” some of the equity they’ve built up in their homes over the years so they can use the cash. However, the Los Angeles Times reports that record low mortgage rates are making cash-out refinancing pass and “cash-in” refinancing very popular. With savings accounts and other investments yielding little or nothing in profits these days, it makes sense to move that cash into a home, especially if it knocks a point or two off the mortgage rate. In last year’s fourth quarter, a third of all borrowers who refinanced mortgages lowered their principal balances by putting money into the deal rather than taking it out.
Be wise about real estate
Most individuals are trying to settle their mortgages as soon as possible. Totalmortgage.com reports that interest saved is interest earned. One who pays off their mortgage as soon as possible is then more likely to have some extra money laying around to spend on other things or other investments. It will help quite a lot of individuals to invest in real estate this way. Other borrowers are taking advantage of record-low mortgage rates to refinance from 30-year fixed mortgages into shorter-term mortgages (15 or 20 year fixed). This sets them up to conserve thousands of dollars over the life of their loans, and their monthly payments are lower than they were before.
Additional reading
Wall Street Journal
online.wsj.com/article/SB10001424052748704421304575383490870014662.html?mod=WSJ_hpp_sections_personalfinance
Los Angeles Times
articles.latimes.com/2010/jul/11/business/la-fi-lew-20100711
Totalmortgage.com
totalmortgage.com/blog/mortgage-rates/low-mortgage-rates-afford-unique-housing-opportunities/5198
