Refinancing Your Home Now Can Save You Cash Tomorrow

March 17, 2010

Chicago home owners have a chance they may not have again in the immediate future: historically low interest rates (about 5%).  Many economists fear and predict a surge in inflation soon.  Meanwhile, the federal reserve has pushed rates to lows never seen in 50 years and it is only a matter of time before they are brought back up to normal levels.

Chicago Real Estate NewsHowever, most home owners are in the difficult position of having lost their home’s equity. Along with lost values, stricter lending standards and higher fees by banks and mortgage giants Fannie Mae and Freddie Mac and declining incomes have made it tougher and less attractive for borrowers to seek new loans.  Most homes in the Chicago real estate market have lost about an average of 20%, ironically the percentage amount of loan to value ratio desired when buying a mortgage without mortgage insurance.

Around 37% of all American borrowers with 30-year conforming fixed-rate mortgages who collectively hold about $1.2 trillion of home loans, have mortgage rates of 6% or higher, according to investment bank Credit Suisse. Many could reduce their rates by a full percentage point if they refinanced at current rates. More than half could lower their rates nearly three-quarters of a percentage point.

About a quarter of all mortgage holders are “underwater” they owe more on the house than it’s worth which normally makes it impossible to get refinancing.  Banks want collateral to back the value of home loans they make. Some people are so far underwater, refinancing ends up being out of the question or more expensive than riding out their current mortgage terms until the real estate market turns around.  This could also be risky proposition considering the financial consequences should inflation hit and hit big (if your mortgage rate is adjustable).

The Obama administration recently extended a program intended to help underwater homeowners refinance, but few people have utilized it as of yet.  Not surprisingly, the program has faced logistical hurdles, delays and confusion from brokers and lenders.

If you can scrape together some cash and put together a refinancing package (if your current rate is higher than 6%) with your lender, you will undoubtedly win out in the long run.  Especially if you plan to stay where you are for the foreseeable future.  Check out today’s mortgage rates here at

About The Author

Read All Stories By Mitch Levinson

Mitch Levinson is the author of “Internet Marketing: The Key to Increased New Home Sales” published by BuilderBooks. He is an Internet marketing expert with expertise in search engine optimization, website development, email marketing, social media and CRM consulting services. He is known for creating effective programs that can be tracked through analytics to prove effectiveness and ROI. Mitch is founder and president of MLC New Home Marketing and MLC FlatFee Realty, as well as managing partner of mRELEVANCE, LLC, a Marketing, Communication, Interactive agency with offices in Chicago and Atlanta. He currently leads the Chicago team. A Multi-Million Dollar Sales Producer who earned an MBA in Computer Information Systems and eCommerce, he brings a unique perspective and experience to the field of real estate communications. Mitch combines the two interests in order to help home builders and developers gain a competitive advantage through the Internet and technology. When he isn’t behind a computer, he enjoys participating in sports and coaching his kids’ teams. Mitch resides in Arlington Heights, Ill., a northwest suburb of Chicago, with his family, which includes two rambunctious labs. Visit my Google+ profile.

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