Why Should Homeowners Refinance Their Mortgage in a Falling Housing Market?
by Peter Harper
The current economical condition of the nation has both its positive and negative effects on the people – irrespective of what they are doing. So, in case of the housing market too, the economic condition has both its positive and negative effects. From the year 2010 on, mortgage interest rates have been low, and people have been refinancing their home mortgages. The only good thing of the economic downturn is that mortgage interest rates fell to historical lows.
Why Homeowners Should Refinance
Homeowners should refinance their home mortgages in this falling housing market:
1. In order to save home – Though the housing market is on the downslide, if a person faces problems in making the debt payments, then he/she can refinance the home loan. This helps in changing the terms and conditions of the home loan, thereby helping the person to go on making the mortgage payments. This is important because if you miss payments on your mortgage, you could lose your home as the lender will foreclose on it in order to get their money back.
2. In order to lower the interest rate – A refinance helps you in lowering the interest rate on your mortgage. Thus, as has been said before, it helps you to continue making the payments on your mortgage. In addition to the interest rate, the loan term may also get extended through the refinance. This too could help considerably lower the monthly payment.
3. In order to save money – Even if you aren’t having much problem in making the monthly payments on your mortgage, if you refinance the home mortgage, you may easily be able to save money on the mortgage payments. This is mainly because with refinancing, the monthly payment that you're required to make on your mortgage is lower.
4. In order to retain the investment – By refinancing your mortgage, you'll be able to retain the investment that you have made on your home. That is, as refinancing helps you in retaining your home even in case of financial crisis, you may be able to retain the investment. It may be important to retain the home as this may not be a good time to sell it.
5. In order to lock in a low rate – As mortgage interest rates are still low, now may be the best time to lock in a lower interest rate. This could prove advantageous to you if you're a struggling homeowner. You're required to pay more on the interest if you take out a long term refinance loan, but it might be worth it if the value of the home increases later on.
6. In order to build greater equity – Retaining the link from the previous point, you may note that as you go on making the monthly mortgage payments with a lower interest rate, you will be building equity in your home faster. This will also help in increasing the equity in your home. And, as home values will improve, you may be able to net a bigger profit when you do sell the home.
You can see that there are various reasons why homeowners should refinance their home mortgages in this falling housing market. Thus, you can see that even though the economic situation is poor and even though the housing marketing is struggling, it's important for the homeowners to refinance the home loan.
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Lew Corcoran, ASP®, IAHSP, IAHSP-CB