True Gotham

After all the bad news that has been coming out recently about the real estate market generally and the mortgage industry, specifically, I am here to finally report some good news. Unbeknownst to most homeowners, interest rates on conforming/non-jumbo loans (i.e. loan amounts of $417,700 or less) have now fallen enough that we have just entered a refinance market.

Interest rates on these loans are now available in the mid 5s on 30 year fixed rate loans and the low 5s on 15 year fixed rate loans. Due to the tightening in the lending markets, banks are requiring that borrowers have good credit (with scores at least in the mid 600s) and equity of 10% or more in their homes. In addition, borrowers will need to be able to verify their income and employment to qualify for these rates.

For anybody who purchased a home in the past two years and has a 30 year fixed rate interest rate of 6.25% or more, it will be worth exploring the possibility of refinancing. If the monthly savings on the new loan, due to the lower rate, are enough to repay the closing costs within 2 years, it is worth refinancing. Since closing costs on cooperative loans are typically only about $2,000 or so, a savings of as little as $100 a month on this type of property will make a refinance worthwhile!

Also, for someone who as an adjustable rate mortgage (i.e. an ARM) that will be resetting in the next year or two, this is the time to replace it with a fixed rate loan. Since most of those ARMs have interest rates in the upper 4s or low 5s, the fixed rates are now low enough to replace them without incurring a significant increase in payment.

Finally, there are many people who have large balances on their home equity lines of credit at interest rates that are tied to Prime. These lines of credit generally have rates ranging from 6.75-9.5%. As a result, it is worth considering refinancing to consolidate these lines of credit with a first mortgage to lower the rate and payment.

If you can benefit from a refinance, this is the time to contact your mortgage professional to begin the process. If rates stay low, which we expect they will, a refinance mini-boom may occur. This will begin to clog the emails, telephone lines and pipelines of lenders, causing frustration and needless wastes of time in applying, approving and closing loans. Moreover, it will delay starting the savings from lower monthly payments that you can begin enjoying now!

Written By:

Daniel M. Shlufman,
President and General Counsel
FCMC Mortgage Corp.
dshlufman@fcmc.net

Any idea what it the refi rate for Jumbo loans, 30-year fixed? between $900K and $1MM?

The rates range from the low to upper 6s depending on the following:

1. location of property
2. value of property
3. type of property (house/coop/condo)
4. credit score
5. verifying income/assets or not

If you provide specifics on your individual situation, I can give you a more detailed quote.

I closed in October with a conventional at 6.5% and a HELOC at 7.2% for the difference. My banker wrote today to tell me that I could get a much better deal on the conventional - just 4 months later, and I'm going for it. (Paid off the HELOC already). $200 to $300 per month in cash flow is helpful since, at this point, the rent I'm getting for the condo does not cover the mortgage payments. But seeing my personal outlay go DOWN is a wonderful sight!

The banker says he's been on the horn with everyone he's worked with who is about 6.25% - and people are jumping at the offers.

Susan