Mortgage Refinance Guide

For the past decade, homeowners in the United States have benefited greatly from low interest rates. The days of low interest rates may be numbered. For the 11th time since June of 2004 the federal government has raised short term interest rates. After each meeting of the fed, many homeowners with adjustable rates get a monthly statement with higher rates from their mortgage lender. The bad news also trickles in later in the form of adjustments. Higher interest rates mean you will have to dig deep to pay bills.

If you financed your home with an Adjustable Rate Mortgage (ARM) there may be trouble for you on the horizon. For example, suppose you took out a $200,000 three year, 4.5 percent interest rate ARM, three years ago; back then the payment was $1,013.37 a month. After the recent interest rate hikes, now you will be paying 6.25 percent with a monthly mortgage payment of $1,214.56. With more rate hikes on the way you can be sure it will only get worse.

What’s a strapped for cash homeowner to do? Refinance now to a fixed rate mortgage. To find out how to save money when you do this sign up for our free guide: Five Things You Need to Know Before Refinancing Your Mortgage.

While the water is still receding from the houses in Louisiana and Texas after Hurricane Rita, now is a very good time to check your homeowners insurance to be sure you have enough coverage, including flood insurance. Unfortunately many homeowners in the affected areas had neither type of insurance; this is usually the case on just about every natural disaster that comes down the pike. Most mortgage lenders require borrowers to carry homeowners insurance and flood insurance where necessary. If your homeowner policy isn’t up to snuff, now is the time to review it and make sure you have adequate coverage including flood insurance. A large numbers of people were totally uninsured when Hurricanes Katrina and Rita struck the gulf coast. What can you expect if you lack sufficient coverage for your home? When Armageddon falls like it did in Louisiana and Texas, many homeowners are unable to rebuild their property.

To clear up some of the confusion regarding homeowner insurance here is a brief rundown. Your homeowner policy covers destruction or damage of your home from fire, wind, hail, lightning, theft, and vandalism up to the amount of the policy. Most homeowner’s policies do not cover damage from earthquakes and acts of war or terrorism; most do not cover your expensive household items either. Your homeowners policies rarely cover flood damage.

For flood damage you need flood insurance. It is, obviously, to pay for the repair of your home due to damaged by flooding. Basic flood insurance covers only the building itself and is limited to a maximum policy value of $250,000 for a residence. Your home’s contents can be insured for up to $100,000 for your residence only under a contents policy which you will have to purchase separately. Review your policy thoroughly to make sure you have enough coverage for your family. Don’t wait for a disaster to strike like it did in Louisiana and Texas. Click here to get started right away

Mortgage rates crept up this week as the Fed raised short term interest rates for the 11th time. The 30 year fixed interest rate mortgage went up to 5.88 percent from 5.84, according to a survey of national lenders this week. The 30 year fixed interest rate mortgage from this survey had 0.36 origination and discount points. The 15 year fixed interest rate mortgage crept up also, going from 5.44 percent to 5.5 percent. Adjustable rate mortgages (ARMs) also went higher, with the 5/1 adjustable rate mortgage (ARM) going from 5.4 percent to 5.46 percent. The average one year ARM crept higher to 4.9 percent from 4.87 percent.

Fixed mortgage interest rates have been doing their own thing in spite of actions taken by the Fed. There have been increases in short term interest rates totaling 2.75 percentage points since 2004, and the 30 year fixed interest mortgage loan rate has dropped nearly one half a percentage point. By raising interest rates this week, the government recognized the economic impact of Hurricane Katrina but stated the long term effect would be minimal.

The government is choosing to concentrate on battling inflation. They want to keep inflation low has to offset to the decline in government bond yields and mortgage rates over the past year. Mortgage interest rates are closely tied to yield rates on government Treasury securities. Mortgage interest rates have not been a problem for prospective homeowners as the 30 year fixed interest rate mortgage has been below 6 percent since April. Many adjustable rate mortgages are raising their interest rates; lower fixed rates are still attractive for new home buyers and those refinancing their mortgages. With the 30 year fixed interest rate at 5.88 percent, now is the time to refinance if you have been putting this off.

There is a lot of confusion in the marketplace today regarding reverse mortgages. With this confusion come misconceptions. Here are several common Reverse Mortgage misconceptions: First, that you’ll lose your home; evil banks will take over your deed to the house. Second, your grandparents will be thrown out in the street. Third, your mortgage lender can take not only your house, but all of your household stuff as well. Reverse mortgages have had a lot of publicity recently due to overvaluation in the housing market, and the fact that many retirees haven’t saved a dime for their retirement.

The question becomes how can you take money out of your house, and not lose it? One way is a reverse mortgage, that is borrowing against your home. Instead of paying the mortgage lender, with this type of mortgage loan the lender pays you. The most popular type of Reverse Mortgage is the Department of Housing and Urban Development Home Equity Conversion Mortgage. Seniors age 62 and above can borrow a line of credit, take a lump sum or a regular monthly income as long as they live in the home. Lines of credit seem to be the most popular; this is because borrowers do not pay interest until taking the money out. This income is not taxable; it is simply a loan. For the most part, this loan is due when the borrower sells, moves, or dies. For many seniors today, this type of loan is a godsend. One of the risks however, with taking out a Reverse Mortgage is this: say the owner leaves the home for 12 months to enter a nursing home; the loan is now due. There are other considerations as well.

To learn more, sign up for our course: “Five Things You Need to Know” using the link on the right side of your screen.

The slight rate hike in mortgage interest rates last week did little to deter homeowners from refinancing home mortgage loans, according to a survey of mortgage lenders this week. Fixed 30 year mortgage interest rates went up to 5.81%, not counting fees last week versus 5.72% the week before, according to the same survey. The fixed 30 year mortgage interest rate is considered a benchmark of the mortgage industry; this mortgage interest rate is still below the 2005 year high of 6.08%, hit last March.

Fixed 15 year mortgage interest rates crept up to 5.38% from 5.29% the week before. Interest rates on one year adjustable rate mortgages (ARMs) crept up to 4.94% from 4.82% the previous week. With ARM loans, low initial payments allow potential homebuyers to purchase a home they might not be able to afford with a traditional fixed interest mortgage loan. Since fixed mortgage interest rates have rising recently, the demand for ARM loans has been increasing.

This week’s survey said the total number of mortgage applications for new home purchases and mortgage refinancing loans jumped up 1.5% last week. Refinancing of existing mortgage loans had the biggest jump.