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Underwater homeowner numbers dip

[Sep 28, 2011.]


If you are looking for a way to improve your cash flow or credit, you may be eyeing today's mortgage rates and considering a home refinance. Unfortunately, even if you have good credit, you also need sufficient home equity to qualify for a new mortgage on your home.

According to CoreLogic, about 10.88 million homes were underwater in the U.S. as of June 30, down from 10.91 million in the first quarter of 2011. Another 2.42 million homeowners had less than 5 percent equity at the end of the second quarter, which CoreLogic classifies as "near-negative" equity.

Mortgage rates and refinancing

If you have no plans to sell your home in the near future, having low or no equity, while disconcerting, is not necessarily a problem. Presumably you are paying down your mortgage balance through your monthly mortgage payments, which builds equity even if home values don't rise. The problem for many homeowners, though, is that they would like to refinance to take advantage of today's mortgage rates.

CoreLogic's research shows that more than 40 percent of borrowers with a loan-to-value ratio of 125 or more are paying interest rates of 6 percent or more on their mortgages. These homeowners could save significant money in interest payments if they could qualify for a home refinance at today's rates, which have been hovering close to 4 percent.

Home equity and refinancing

The Census Bureau shows that about one-third of all homes in the U.S. are owned without a mortgage at all because they were purchased with cash or the homeowners have paid their mortgage in full. Those homeowners would likely be able to easily take out a home equity loan or a new mortgage if they needed cash.

If you flip the CoreLogic data, you'll find that 77.5 percent of all homeowners with a mortgage owe less on their home loan than their home's value. If you aren't sure about your home value and want to know about refinancing options in your area, go here.


About Author:

Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance, and business.

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