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Thirty-year mortgage rates are creeping up, but that’s not stopping a near-record number of U.S. borrowers from refinancing their home loans and tapping their equity in the process.
For the fourth quarter of 2005, Freddie Mac found that 80 percent of homeowners borrowed against the equity of their home when refinancing an existing loan, up 24 percentage points from a year earlier and just one percentage point short of the mid-2000 peak of 81 percent.
Although some analysts worry about Americans taking on increasingly heavy and risky debt loads, Freddie Mac Chief Economist Frank Nothaft suggests that savvy borrowers actually may be replacing their higher-cost debt with lower-cost debt.
Refinancing an existing loan and pulling some money out allows them to pay off any floating-rate debt, lock in fixed borrowing costs at a time when interest rates are drifting higher, and finance home improvements or other major expenses at a lower rate than through increasingly costly home-equity and credit-line rates.
Source: Realty Times, Kenneth Harney (02/13/06)
? Copyright 2006 Information Inc.
Today, from the Real Estate Journal, we have this article on Adjustable Rate Mortgages:
Mortgage lenders, looking to boost profits as the mortgage boom cools, are encouraging borrowers with adjustable-rate mortgages, or ARMs, to refinance into fixed-rate loans. It’s a move well worth considering — but carefully, because it won’t make sense for everyone.
The full article from the Real Estate Journal is here:
RealEstateJournal | Adjustable-Rate Mortgages Are A Smart Move for Some, But Not All
Plus, to help you make your decision, I am also posting this calculator from Bankrate.com:
http://www.bankrate.com/brm/mortgage-advisers/fixed-vs-ARM.asp
Predatory Lending
Predatory lending strips borrowers of home equity and threatens families with foreclosure. Often borrowers are deceived into accepting unfair loan terms, usually through aggressive sales tactics. Often they are taken advantage of because of their lack of understanding of terms and involvement in complicated transactions. Even more informed consumers are occasionally fooled. Anecdotal information suggests predatory lending is concentrated in poor and minority communities, where better loans are not readily available. Signals of predatory lending practices include, but are not limited to:
Aggressive and deceptive marketing
Making loans without ample consideration to the borrower’s ability to pay
Financing excessive fees into loans
Charging higher interest rates than a borrower’s credit allows
Home improvement scams
Among the factors that contribute to predatory lending are the steering of minorities toward the subprime market, even when they qualify for prime loans with better terms, an inadequate number of mainstream lending institutions in minority neighborhoods, and a general lack of information in minority communities about available mortgage products.
