Refinancing a home

Thinking of refinancing your home? As you probably know, real estate and financial markets have been changing rapidly lately. Harold Perkins, president of the Galaxy Lending Group in Arizona, Oregon, Texas and Washington, filled us in on what’s been happening and how that can affect your plans. 

Interest rates are rising.

Interest rates have gone up about 1 percent during a relatively short time.

“A year ago they were averaging about 4 percent; now they’re about 5 percent,

 Perkins said. “If the Fed continues to raise rates, that will not have an effect on mortgage rates directly. It will have more of an immediate effect on car loans and credit card rates and shorter-term loans. But next year, it can be more expensive to buy and finance a house. If rates rise, you can pay as much as $125 a month more due to rate increases, depending on the size of your loan.” 

Don’t expect the housing market to slow down in response to higher rates.

So far, the mortgage trends have not affected the prices of homes. There has been recent appreciation of about 9 percent in housing prices in the past year. People are still buying.

The size of the downpayment on a house can vary widely.

The old rule that said you needed a down payment of 20 percent of the value of a house went away some time ago, but that doesn’t mean people are not doing it.

“If a homeowner is trading up, they often have a large down payment,” Perkins said. “But lower down payments are possible with first-time buyers. The average down payment is about 19 percent, but there are even zero or 3 percent down payments.”

Generally, the higher the credit score, the lower the interest rate on a

mortgage.

So it’s in the buyers’ best interest to improve their credit ratings by doing things like paying off credit cards and other debts.

How low can your credit rating be and still be able to get a mortgage?

“There are possibilities even if a credit rating is as low as 580. Lower than that it can be more difficult,” Perkins said. “With lower ratings it can be hard to qualify but not impossible.”

You probably can’t refinance in today’s market to get a lower interest rate on your mortgage.

“Some homeowners now are refinancing to cash out the equity in their homes to remodel or make improvements or to consolidate other debts,” Perkins said. 

If you want a second mortgage to do remodeling, you can probably get one if you have some equity in your home.

For the first 10 years, this kind of loan is something like a credit card to use for home improvements, Perkins said. Then it’s an installment loan for the next 20 years. JN

R.C. ‘Romey’ Romero is co-owner of Arizona’s home improvement radio program ‘Rosie on the House.’

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