Mortgage rates have fallen even further lately, and banks are implementing new incentive programs to entice home owners to refinance their mortgages. The average interest rate on a 30-year mortgage fell to 4.05% for the week ended December 23, 2011, and rates on “jumbo mortgages”, i.e. private loans usually larger than $417,000, are also at new lows, averaging 4.61%.
This will result in significant savings for homeowners seeking to refinance their 30-year mortgages. Since many homeowners have already taken advantage of the lower interest rates and refinanced, banks are rolling out incentives to win new business, particularly regional and community banks.
The discounts can be sizable.
For example, one bank has aggressively slashed its refinancing fee, thereby saving homeowners thousands of dollars in closing costs. Another bank has taken the rare step and refinances large mortgages up to $4 million at no extra cost. It also allows borrowers to roll the refinancing costs into the mortgage. Moreover, if the borrowers had their original mortgage with that bank, the borrowers are not required to provide the detailed income documentation that other borrowers are required to do in order to refinance.
Unfortunately, many homeowners do not meet the necessary qualifications to refinance.
One of the toughest requirements is that homeowners have at least 10% equity in their homes. The federal government has recently initiated a program that is designed to come to the rescue of homeowners whose mortgage is owned or guaranteed by Freddie Mac or Fannie Mae. It is the revamped Home Affordable Refinance Program (“HARP”) which provides that:
If you’re not behind on your mortgage payments but have been unable to get traditional refinancing because the value of your home has declined, you may be eligible to refinance through MHA’s Home Affordable Refinance Program (HARP). HARP is designed to help you get a new, more affordable, more stable mortgage. HARP refinance loans require a loan application and underwriting process, and refinance fees will apply.
Refinancing is definitely worth a look given the delicate predicament of the Euro Zone which, along with other economic factors, including the still-fragile state of the American economy, is causing investors to park their money in U.S. Treasurys, which drives down mortgage rates, which are tied to those very same U.S. Treasurys.