What you should know about the market…
• Many
homeowners have been enticed lately by mortgage interest rates hovering
near 5 percent, leading some to think about refinancing their home. The
first step owners should take is to have their property’s value
assessed and to contact a REALTOR® to find out what similar homes are
selling for in the area, as opposed to their listing prices. If there
have been a high number of foreclosures in the neighborhood, chances
are property values have declined.
• Most
lenders today will not complete a home loan refinance unless the owner
has at least 20 percent equity in the property and proof of income.
However, homeowners who are underwater—those who owe more on the
mortgage than the home is worth—still may qualify for a home refinance.
Some federal programs allow homeowners to refinance their mortgage up
to 125 percent of the home’s value.
• Some home loans include prepayment penalties, meaning the homeowner
has to pay a penalty for paying the loan off earlier than the original
loan terms. Prepayment includes refinancing, as the original loan is
paid off through the refinance. If the fees are equal or close to the
amount the owner would save with a refinance, then refinancing the home
may not be the best option.
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