Why Mortgage Refinance is Slow Despite Record Low Mortgage Refinance Rates
By: Ed Ferrara
Almost everybody and their mom knows you should of refinanced by now. Most everybody who can has already. Despite a 6 week decline in mortgage refinance rates to all time record lows (4.5% 30 Year Fixed @ par), mortgage refinance activity is down from last year. Why? If you think about the market conditions a few things are obvious. Home values have decreased leaving most homeowners that would benefit from a mortgage refinance stuck in their current loans due to a lack of equity.
One of the first things banks look at after determining you’ve got the equity to refinance is your income. Many have lost their jobs disqualifying them for a mortgage refinance. Many people used to get stated income loans with no income documentation required. Stated income loans which were used mostly the self employed who did not pay their full taxes which is more people than you may think, are no longer available. Matter of fact they’ve been made illegal in many states including Minnesota. Some can’t refinance because new guidelines for condo’s have made it nearly impossible to refinance a condo. Others can’t refinance at a 30 year fixed rate of 4.75% because they’ve got a jumbo mortgage above Fannie and Freddie limits. Where’s a World Savings no income no asset jumbo mortgage when you need it? World Savings is out of business (folded and disappeared into Wachovia). Ditech is doing jumbo loans, but forget 4.5% 30 years fixed. Try out a 5.875%, that’s not what I saw on a freeway billboard. A final reason I’ll mention, people used to bu ya home with little to money down, watch it increase in value by 20% in 1 or 2 years and refinance. That’s just not happening anymore, anywhere.
For all these reasons and more mortgage refinancing isn’t what you’d think despite today’s mortgage rates being at all time lows. When mortgage rates eventually do rise, to the 5′s, and then into the 6′s refinancing will be dead.