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All Roads Lead to Refinance Now While Low Mortgage Rates Last

[Mar 30, 2010.]


Individuals who are looking to refinance a home loan have perhaps become accustomed to negative news headlines. The happiness of low mortgage rates has been severely hampered by news of underwater home values, foreclosure sales driving down home prices, and widespread unemployment.

But of late, and especially this week, refinance news headlines have turned somewhat positive. Three refinance news stories in particular should prompt individuals who are thinking about trying to refinance to go ahead and try to refinance.

1. Bond Market Interest Rates Rise Sharply

The market for U.S. Treasury bonds is not necessarily directly tied to the market for mortgage interest rates, but neither are these two interest rates unrelated. Therefore, when Treasury bond interest rates rise sharply as they did this week, mortgage rates also become in danger of going up.

Treasury bonds are an interesting indicator, too, in the sense that these are the lowest-risk bonds for investors to purchase in the entire world, so when the U.S. government has to pay more to borrow money, then it's logical to assume that mortgages may be harder to come by as well.

When combined with the fact that the U.S. Treasury is attempting to cease its $1.25 trillion program to purchase mortgage-backed securities, an interest rate rise in U.S. Treasury bonds makes refinancing now while mortgage rates are still low look like a tremendously smart idea.

2. All Refinancing Is Local When It Comes to Rising Home Prices

According to the famous/infamous Case-Schiller Index of home prices, prices for January were down a mere 0.7 percent in the 20 cities surveyed, good enough to be the best month in three years.

For homeowners who are having trouble refinancing because the mortgage sizes are too big relative to home values, any stoppage of the decline in home prices is the best refinance news there is.

Delving a little deeper into January's numbers, certain states and cities actually saw prices go up. California, for example, was up 1.8 percent.

3. Loan Modification Programs Undergoing Further Modification

Thirdly, the Obama Administration announced plans to further modify the home loan modification programs that are underway and enjoying decidedly mixed success.

The details of the revised anti-foreclosure strategy remain murky, but it looks like the efforts will focus on borrowers who are unemployed. The program would call for banks to slash mortgage payments for three to six months so such borrowers can get back on their feet.

For a portion of the million of Americans who are suffering from unemployment, a three to six month foreclosure hiatus could be enough time to get ahold of a steady enough income to refinance at the end of that hiatus.


About Author:

Andrew Freiburghouse is a writer and businessman. He has worked as a magazine reporter, tax preparer, screenwriter, copywriter, and loan officer. He graduated from Santa Clara University in 1999 with a B.A. in English. Andrew was born and raised in the City of Los Angeles.

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