Refinancing Your Home Mortgage
January ushers in a season of hope: a new year, a new president and another chance at making things the way you want them to be. However, as optimistic as I try to be, the current economy makes it hard to enjoy my retirement years as I had envisioned.
I don’t like it when I am listening to economic analysts who have pretty much written off the entire year, predicting that 2009 may make 2008 look good. And I have to admit that if I allow myself, it can get pretty depressing listening to the dismal projections that seem to bombard us at every turn.
So, when I heard the interest rates were at an historic low and that banks are once again beginning to lend money, it seemed like the perfect time to explore refinancing our home. Being on a fixed income, or retiring and relying on your savings that are no longer what they once were, can make the idea of refinancing and reducing monthly payments very appealing. Average rates for a 30 year fixed rate loan are now below 5 percent. This translates to savings of about $200 a month on a $200,000 loan.
Being of retirement age, my husband and I have bought and sold homes throughout our careers, but when they say times are different, they aren’t kidding. I am reminded of Harry Truman’s adage that when your neighbor loses their job, it’s a recession, but when you lose your job it’s a depression. Similarly, we had watched the stories of declining home values, but we thought that applied to our neighbors, not us. So, in applying for a new mortgage, it never occurred to us that our home value had dropped as dramatically as the appraisers reported.
I don’t want to say I was over-confident, but when the process started, we were told we had a good credit rating, not only good, but very high. Therefore, I thought, this should be easy. Just pay your non-refundable application fee of anywhere from $400 to $1000 and wait for them to call us for the closing. After all, we are attempting to refinance through the same bank that currently holds our mortgage, and our principle has decreased through the years, so were are actually asking this same bank for less than we originally financed the home for.
Now the sobering reality. Your home may not be worth as much as it was when you bought it and your financial institution may not be as inclined as they once were to even loan you the same amount you currently owe on your home! Yes, this seems incredible that we home owners who have never missed a payment on any debt in over 40 years may no longer quality for a loan on our principle residence.
Whether or not you decide to proceed with refinancing, or to keep your current loan, it is an opportunity to think about what you want to do in the new year to make it a great year. After all, even in bad times there are opportunities to do things that will improve your future. It is all about looking for that silver lining in the dark clouds that surround us, and refinancing at historically low rates may just be one of these opportunities to consider.