Mortgage rates are looking at some new lows for 2010. As of Friday afternoon, you can refinance a conforming loan at 4.75% (par).
If you refinanced at least six months ago, you might want to see if you can do better now. Why six months? Because most lenders want to see at least six months of payments before they will consider underwriting a new loan.
Interest rates are very attractive right now and some people think it is a great time to pull some money out of their house. Here are some things to know if you are considering this.
Terms for cash out refinancing aren’t as good as straight rate and term refinancing. Today, most lenders charge an extra 1% on the interest rate for a cash-out refinancing. Lenders also put restrictions on the amount of money you can pull out. Most lenders want to see the borrowers retain at least 35% to 40% of equity in their house. The best rates are for loans where the LTV is 60% (40% equity).
The amount you will be able to pull out will depend on the appraisal and this process has changed for some lenders in the past year. Many lenders now require that they order the appraisal. As a result, many appraisers today are chosen based on their fees and not their knowledge of the area. So, in general, appraisals today are coming in on the lower side.
It turns out that interest rate loans don't peform as well as other loan products. So, Freddie Mac will stop buying them in the fall.
Last week, Freddie Mac announced that on September 1, 2010, the company will cease purchasing and securitizing interest only mortgages, including Freddie Mac Initial InterestSM fixed-rate and adjustable-rate mortgages. Interest only mortgages, including Freddie Mac Initial Interest mortgages, provide for interest-only payments for a specified period of time beginning with the first monthly payment after the note date, and principal and interest payments on a fully amortizing basis for the remainder of the mortgage term.
Given the continued lackluster performance of the economy, this is no surprise. And in the end, probably better for consumers.