Many, many loans are out there that have set to an interest rate much higher than what is currently available today. While a lower interest rate can save thousands of dollars a year (we’ll get into the numbers later) many homeowners have been unable to refinance due to their equity (or lack of) in their home. The banks don’t want to lend more than a home is worth (understandable).
To help this during the recent drop in home values, the Feds stepped in and guaranteed loans they insured with an LTV (Loan to Value) of 97 to 125%. In simple English, that means that if your home is currently worth $100,000 and you owe $125,000, you can refinance if you qualify under the other (normal) criteria.
Good news, right? Unfortunately for many, with home values dropping as much as 40% in some areas and with the original loan being for 100% of the homes selling price, they still didn’t qualify. Even homes with older loans but were refinanced to facilitate upgrades or maintenance also fall into this category. Toss in an equity line of credit and the current LTV might be 160%!
The new program will now provide for these home owners. Refinances are now available for people meeting the other normal criteria regardless of their LTV! An article in today’s New York Times explains that more (to read it click here).
Why would one want to refinance? Lowering your interest to today’s fantastically low rates can save you a bundle. For some, this will even make the difference between staying in their home or being forced out. Let’s assume your loan amount is $350,000. With an interest rate of 9.75% (not uncommon) the monthly payment (principal and interest only) on a 30 year fixed rate loan is $3,007.04. If we drop that interest rate down to today’s rate of 3.75% that same monthly payment in only $$1,620.91! NEARLY 1/2! Would that help your monthly budget?
And if you are still able to make that $3,000 payment? Great! Refinance, then continue the payment amount and you will have your home paid for in just over 12 years. FREE AND CLEAR IN 12 YEARS with the same payment as you are making today!
Like to look at other scenarios? You are welcome to use the calculators on our web site (click here) or call or email us today with your questions. We will get you on the path to that joy.
Questions about YOUR best action? Contact us today for your free, no obligation consultation. Call or text 530 315-2808. Email Taxes@EncoreRES.com (Encore Real Estate Services).
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