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By: Rosemary Rugnetta | May 21st, 2013
When it comes to refinancing a mortgage, there are always many factors to consider besides the current mortgage rates. The individual reasons behind refinancing come into play and are just as important a financial decision as was the original loan transaction. While there are many pros and cons of refinancing that homeowners consider, refinancing before the summer selling season may be the most important fact to deal with right now.
While everyone is watching mortgage rates, not everyone will be watching home price fluctuations. As we enter the hot selling season for real estate, the summer months, more homeowners may be placing their homes on the market because of rising home prices. Many who have held back for quite some time due to the housing crisis and loss of equity, may be looking at this summer as an opportunity to sell at a price that is acceptable. As tight inventory has made prices increase at an incredible pace, there is a strong possibility that the market may soon see many more homes being put up for sale which will increase the flow of homes available to buyers. If this happens, it is quite possible that home price increases will stall or even go down as this stock of for-sale homes continues to grow.
If inventory increases and home prices stall or decrease, homeowners who want to refinance will find that the equity held in their homes has done the same thing. Less equity equals a higher loan to value ratio which translates into a higher mortgage rate. Mortgage rates that are quoted to a borrower are based on many factors, including debt to income and loan to value ratios. Any increase in loan to value can affect the mortgage rate. In addition, any increase in loan to value can put a homeowner under the 20% equity that is needed in order to avoid private mortgage insurance.
Watching mortgage rates is important when refinancing even though everyone knows that rates are unpredictable. Right now, rates are low and affordable and are being kept that way by the Federal Reserve. No one knows when the Feds will discontinue their purchase of mortgage backed securities and rates will increase. This is also something to consider if refinancing is an option in the near future.
According to the National Association of Realtors Chief Economist, Lawrence Yun, “The supply/demand balance is clearly tilted toward sellers in a good portion of the country,” he said. “Inventory conditions are expected to remain fairly constrained this year, so overall price increases should be well above the historic gain of one-to-two percentage points above the rate of inflation. If home builders can continue to ramp up production, then home price growth is expected to moderate in 2014.” Yun pointed out that many areas across the country are experiencing a seller’s market. Keep in mind that with this happening, potential sellers may be more apt to join the market.
Rates are low and prices are high, the perfect combination for refinancing. Waiting to refinance can cause homeowners more grief if things were to turn around quickly. Each property location is unique and prices will vary, however, no one knows if the current peak has been reached. Refinancing before the summer selling season is now important for any homeowner who has been sitting on the fence waiting for the perfect time.
FreeRateUpdate.com researches and reports advertised rates of active lenders within the FreeRateUpdate.com network.
By: Rosemary Rugnetta | May 9th, 2013
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By: Rosemary Rugnetta | February 27th, 2013
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