Housing Market Affecting Mortgage Refinance Opportunities
If the old adage that what goes up must come down is true, then the US housing market would be a good example to prove it. The housing market boom from 2003 through 2007 was quite astonishing as home prices soared and people used mortgage refinance loans to lower their interest rates and also to get cash out of their homes. Since 2007, the housing market has been crushed by about an average of 30 percent in value declines. This turn of events has severely impacted mortgage refinance opportunities for many refinancing homeowners because of the loss of equity experience by most people in the US.
As an example, if your home was worth $200,000 in 2007 and has declined in value by 20 percent, then the current fair market value of your home is $160,000. That is a drastic difference, especially when it comes to applying for a credit card consolidation refinance or a straight mortgage refinance. On a credit card consolidation loan, you will be capped at 85 percent of the appraised value of your home, so in this instance, you would be capped at a total loan amount of $136,000. For many, the combination of declining home values and the lowered LTV limit for cash-out refinance mortgage loans has left no options for a successful loan closing.
If you are looking to refinance your mortgage without cash-out or debt consolidation, then the fha refinance mortgage loan program could be a good fit if your home has lost value. With the fha loan program, you can refinance up to 97 percent of the appraised value of your home without getting a high qualified interest rate. There is an upfront mortgage insurance premium and monthly private mortgage insurance with this option, but if it’s the difference between locking at current rates or not being able to refinance your mortgage, it may be well worth it.
