. However, record-low mortgage rates and a real estate slump that is driving down home prices present unique opportunities, even for individuals whose mortgages are under water. Having a lower rate of interest will helps numerous be willing to take that step of losing some money to hopefully do better in the long run. Many are losing their homes, but coming out ahead with what they get instead. Others are learning that spending their own cash to refinance mortgages is one of the safest investments to make these days.
Mortgage rates and the housing market
Economists told the Wall Street Journal that right now, trading homes or refinancing your home is going to make a huge difference to your cash flow. Better homes are accessible to everyone who is willing to make the sacrifice with their mortgage. Since with mortgage rates so low, monthly payments of larger homes are nevertheless manageable.
Cash-in refinancing versus cash-out refinancing
Typically, people refinance to “cash out” some of the equity they’ve built up in their homes over the years so they can use the cash. However, the Los Angeles Times reports that record low mortgage rates are making cash-out refinancing pass and “cash-in” refinancing very popular. With savings accounts and other investments yielding little or nothing in profits these days, it makes sense to move that cash into a home, especially if it knocks a point or two off the mortgage rate. In 2009’s fourth quarter, a 3rd of everybody who refinanced their mortgages put money into it so their principal was lowered drastically.
Smart real estate investing
Some individuals are opting to pay down their mortgages early. You’ll have all that money you saved on interest for spending now, reports totalmortgage.com. One who pays off their mortgage as soon as possible is then more likely to have some additional money laying around to spend on other things or other investments. Real estate investing like that is a breath of fresh air these days. Other borrowers are taking advantage of record-low mortgage rates to refinance from 30-year fixed mortgages into shorter-term mortgages (15 or 20 year fixed). Monthly payments are often less than before, and consumers conserve thousands of dollars doing this.
Additional reading
Wall Street Journal
online.wsj.com/article/SB10001424052748704421304575383490870014662.html?mod=WSJ_hpp_sections_personalfinance
Los Angeles Times
articles.latimes.com/2010/jul/11/business/la-fi-lew-20100711
Totalmortgage.com
totalmortgage.com/blog/mortgage-rates/low-mortgage-rates-afford-unique-housing-opportunities/5198
