Refinancing Frenzy Hits The Land
Imagine refinancing your home mortgage to get a higher interest rate — this is supposed to be the newest rage with people willing and eager to pull out buckets of cash! Unlike in the good ol’ times, when you refinanced to a lower rate of interest, today almost nine of 10 homeowners who refinanced, cashed out additional money — often tens of thousands of dollars. And matching the trend are refinancers who are today opting for larger replacement first mortgages with rates averaging about one-half of a percentage point higher than on their old loans.
So, what is the reason for this change in trend? Quite a few: Firstly, short-term interest rates no longer hover near 4 percent. And the worst part is that home equity lines of credit no longer seem a good option. The adjustable rates, which were their strong point, are now racking up bigger monthly costs. Moreover, thirty-year fixed-rate first mortgages no longer are less than 6 percent. Now the prime rate is 8.25 percent and could move higher. Washingtonpost.com reports:
Say you also have lots more than $100,000 sitting untouched and frozen in home equity. Rather than signing up for a home-equity credit line tied to a jumpy and unpredictable prime rate plus 1 percent, you instead choose a fixed-rate cash-out refinancing.
Read more: Refinancing To Get Cash, Not Save It
If you enjoyed this article, please bookmark it at del.icio.us »