Why Are More Homeowners Refinancing Their Mortgages?
A recent article in Bloomberg Businessweek reported that 80% of all mortgage applications are now for refinancing.
The high increase in demand for refinancing is mainly a result of two factors: First, homeowners are taking advantage of the historically low interest rates to reduce their mortgage payments. Second, since the housing market is in recovery and few purchases are being made, banks aren’t issuing many new mortgages in the first place and want to encourage refinancing.
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The falling interest rates encourage consumers to refinance because they want to save money—being charged less for their mortgages means paying less money to the bank.
30% of these refinancings are part of the Home Affordable Refinance Program (HARP 2.0), a federal program that lets borrowers who aren’t behind on their mortgage payments but who owe more than their home is worth refinance.
Under HARP 2.0, borrowers don’t have to go through a new application process if they refinance with the same bank that issued their mortgage, and if the loan is guaranteed by Fannie Mae or Freddie Mac.
Lowering monthly payments for borrowers through refinancing is like “an economic stimulus,” said the housing data firm CoreLogic.
So refinancing your mortgage could not only help save money, it could also boost the economy!
Interested in refinancing your mortgage? Learn the basics here.