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 and also the housing market
With the U.S. housing market within 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. Better homes are available to anyone who’s willing to make the sacrifice with their mortgage. And with mortgage rates so low these buyers can keep their monthly payments manageable, although the new homes are more costly.
Cash in or cash out
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. A 3rd of everybody who refinanced their home in 2009’s 4th quarter all put more money into it than money they could have taken out of it.
Smart real estate investing
Many want their mortgages to be gone. Totalmortgage.com reports that interest saved is interest earned. Paying down a mortgage — even an underwater mortgage — early is essentially equal to putting that money in something that yields an equivalent return to the borrower’s mortgage rate. Real estate investing like that is a breath of fresh air these days. 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). Monthly payments are often less than before, and consumers save thousands of dollars doing this.
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
