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Rate Rises Create Rush on Refinance Applications

Refinance Options - Lower Rate, Lower Payment, Better Terms or Cash-Out

Refinance Options – Lower Rate, Lower Payment, Better Terms or Cash-Out

Orange County, CA – The rate rises which have welcomed in the New Year have helped to generate a tsunami of new refinances.

According to the Mortgage Bankers Association, the volume of applications for mortgage refinancing leapt by around 12% for the week ending 4th January 2013. This coincides with a significant rise in mortgage rates of 0.09% during the same period.

There is a big belief that people will look to refinance ahead of any breach of the 4% mark. To many, it would appear that we are a significant distance away from that point. But with the mortgage market moving fast and appearing to pick up pace, people are clearly happy to refinance now.

As of the 28th December 2012, we had a 30 year fixed rate mortgage rate of 3.52% average across the US, with a steep rise to 3.61% on 4th January 2013. If we look at a mortgage at the normal conforming loan standard of $417,000, buyers are going to see an increase of $21 on their monthly payments. This is a large rise given we are only discussing a weekly change in rates. Of course, if you are in a high cost area such as Brooklyn or Orange County, you’re facing an even larger payment change. If you’re talking about a $625,500 loan, then there’s no doubt that your repayment costs are going to increase by a larger margin.

For the same week ending January 4th, 2013 a remarkable 82% of all applications for the week were refinance.  Refinance application figures include people applying for the HARP mortgage program along with the VA IRRRL. These were by far the most popular mortgage applications for the period.

Drilling down into the statistics shows that unsurprisingly, 25% of all refinance applications were for the HARP 2, the Governments affordable package designed to increase the number of refinance applications across the country. You may know of HARP as the ‘Obama Refi’, or the ‘Making Home Affordable’, thanks to widespread publicity for the deal in the past. It’s still clearly working, as people all over the country take advantage. Although it is only a slight increase in percentage terms on the same period for 2012, HARP refinancing applications were only accounting for 20% of refinance applications back in October of 2012. This shows a 5% increase over the course of a few months. As you might be aware, the HARP 3 program is on the horizon, and if that is passed, there’s a good chance we will see an even larger leap in terms of refinancing.

If you need any advice about the refinancing of your own home, then it is imperative you get professional advice. Lowering your rate, reducing your loan term, removing mortgage insurance, and consolidating debt are some of the most common reasons for refinancing. Contact me to learn more about your options. We’ll illustrate side by side loan options that will give you a total cost analysis in a simplified format.

Scott Storace

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