How to Capitalize on Housing Now

refinance 8

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  • Those looking to refinance should be aware of how declining home values will affect their LTV.

Hints on Making the Most of Today's Market

It is important to look forward sometimes and see what may be on the horizon. Whether you are looking to buy, sell, or refinance your current mortgage, some current trends in housing could help you make the decision on whether it is time to act or wait.

Hint 1: Housing Values on the Decline

Yup, it seems to be a reality now for most places (barring highly populated and popular areas) that housing values will decrease in the coming months. Economists believe they could be down by as much as 8% by June of 2011. Homeowners looking to refinance should consider that their overall loan to value ratio (LTV) is likely to be hurt by this change. If you are currently thinking of refinancing, but aren’t sure how this may affect you, consider that 8% of $150,000 is a drop in value of $12,000. This is especially disturbing news for those borrowers looking for loans who already have LTVs over 70%. After 80% LTV, borrowers will be faced with the prospect of paying PMI (private mortgage insurance) or being declined by the lender. Those looking to sell should also understand that they may not be able to get the same value for their home in 2011 as they could get in 2010.

Hint 2: QE2 Hikes Up Interest Rates

When the government announced that it would begin buying Treasuries once again to help stimulate the overall economy, it was said that interest rates would remain low or perhaps drop as a result. Well, the opposite took place. In November and December of  2010 rates jumped higher than they had been since August and most analysts say that these rates are not expected to fall anytime soon. To give some perspective, however, it must be noted that current rates are the lowest that they have been in the last 26 years! With the current volatility in rates, borrowers looking to refinance should apply as soon as possible and lock these historically low interest rates at the first opportunity. Those looking to buy or sell should also be aware of these changes and how it affects their transactions.

Hint 3: 15-Year FRMs are a Great Choice

With most of the focus on the foreclosure problems and interest rates, it is easy to miss another trend that has been forming with consumer mortgages. Did you know that more than 25% of mortgage applications that come through these days are looking for a 15-year fixed rate mortgage (FRM) and not the more common 30-year product? It’s true. These shorter terms are helping consumers to lower their overall debt and put themselves on the fast track to home ownership.

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