Refinancing And Higher Mortgage Rates

By Author: Nick Adama
Total Articles: 197
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Mortgage rates have been at unprecedented lows for the last few years of the foreclosure crisis, but over the past few weeks rates have jumped significantly, hurting many homeowners' chances of refinancing. When interest rates rise, monthly payments are calculated accordingly, and will increase as well, in addition to costly origination and closing fees that typically go hand in hand with a refinance. As a homeowner with an adjustable-rate mortgage, you can weigh your mortgage options and see if the net difference in monthly payments is worth the cost of refinancing. Fixed rates on 30-year mortgages are lower than they were a year ago, so there is still a chance that you can improve your finances with a re-fi if you got a loan on your property in 2008.

If your loan is an adjustable rate mortgage that is set to go up in the next year or two, you can bet that your rate will be higher than when you purchased, and therefore it is worth looking into a fixed rate mortgage at a low interest rate. If you have reasonably good credit and stable household monthly income, then you can qualify for a number of refinance options, ...
... including less stringent loan modification standards. The federal government is encouraging such modifications and banks and lenders are being encouraged by the Obama administration to work with struggling borrowers who may be behind on payments or facing foreclosure.

To keep mortgage rates low in hopes of stimulating the real estate market, the Obama Administration has allocated a budget of $1.25 trillion to commit to purchase mortgage-backed securities. Because the Fed does not plan on selling these securities interests for at least 10 years, Ideally they can wait out the current housing crisis and allow time for the real estate market to recover before getting rid of their investment. The purchases by the Fed have enabled millions of Americans to refinance into lower interest loans, but as mortgage rates continue to rise, the governments plan could backfire against them and their gigantic investment in mortgage-backed securities. The Feds buying of mortgage-backed securities to suppress interest rates for the American homeowner is known as quantitative easing.

If you have fallen behind on some payments but have decent credit otherwise and steady monthly income, you should contact your lender and see what workout options are available. This is obviously a better alternative to going through the foreclosure process which can negatively effect your credit, and severely limit your chances of getting approved for home purchase in the near future. Again, banks want to be able to make payments affordable for you, and they need to make their money on the interest charged on the loan amount. If you can't make payments, they have to foreclose, which costs them money and banks do not want to own and manage a property. The property is put up as collateral on the loan, but most banks would much rather see you keep the home, even if it means less profit. Because banks have so many defaulting loans and struggling homeowners, they are providing more and more opportunity to work with you on a refinance or loan modification to avoid the foreclosure process.
Nick is the owner of the ForeclosurefishStop Foreclosure Blog, helps homeowners who are facing foreclosure and need help stopping foreclosure.