With interest rates dropping, many homeowners are wondering if refinancing  their mortgage makes sense.   Many people are taking advantage of historically low mortgage rates for new purchases and refinancing.  The refi boom is expected to push total mortgage originations to $2.78 trillion in 2009, which would be the fourth-highest total on record. Refinancings would account for 69% of those mortgages. My assistant refinanced his home last week for a crazy low rate of 4.8% with Steve Tetzner from Homestar Mortgage.  He had been listening to Steve and I talk about rates, and even though he had a great 6% rate, as they continued to fall, he got all his ducks in a row so he and Steve were ready when the rate hit his target number, he is now  saving almost three hundred dollars a month

To figure out whether it’s in your best interest to refinance, you need to calculate your break-even point:  or how long it will take to make up your closing costs. You calculate the break even point by dividing closing costs by the monthly savings.  If your mortgage payment is $200 a month lower after refinancing, and the closing costs are $4,000, your break-even point is 20 months.  In this case, if you expect to live in the house for more than two years, you’ll save money by refinancing. If you plan to sell the house sooner, you should stay in your present financing.

This Week’s Real Estate Insight:

Your own financial situation will dictate when it’s time to refinance, there are many factors surrounding refinancing, including the amount of equity you have in your home, lenders are looking very closely at the Loan to Value ratio, and appraisers are being very conservative in their values.

  Spring activates the Real Estate Market in New England; more homes are sold in this period than any other time of the year. Houses look their best when framed by spring blossoms, and parents like to time their moves to coincide with school schedules.  While current economic conditions have reflected relatively flat home sales, there are a few promising reports in the Real Estate market.

• The National Association of Realtors announced that pending home sales were up 2.1% nationally, 10% in the Northeast over the same period last year.
• Housing Affordability Index rose nearly one percent, a 36.3% gain over a year ago. A family, earning $59,700, could afford a home costing $285,600 in February (with 20% down assuming 25% of income is devoted to mortgage principal and interest). A year ago that same family could only afford $164,600.
• Mortgage rates continue to set record lows and applications were up.

These factors make for incredible buying power for homebuyers, especially for the first time homebuyers when you consider the added bonus of an $8,000 federal tax credit.

This Week’s Real Estate Insight: 

The numbers do not mean that we are out of the woods yet, but a few more months of positive numbers and we will be able to call it a trend.