Thursday, September 1, 2011

Time to refinance your home (again?)

One year ago I stated it would be a good time to refinance your home.  Once again the opportunity presents itself. The 30 year conventional home loan rate is near historic lows.

Conventional 30 year home loan rates

Theoretically the vast majority of home loans out there could be refinanced but there are a few unfortunate facts which may prevent many from refinancing: Negative equity, conservative valuations and high unemployment.  

CNN Money has a good article detailing the these 3 challenges.  

If you are wondering how monetary policy can have limits this is a good example of how and why.  In an effort to continually re-stimulated the economy and encourage society to take on more debt over time we have reached a point where historic low interest rates will just not do much for the US consumer. They are already too tapped out and low interest rates will not encourage them to borrow more let alone take advantage of the lower interest rates and buy a home; they just can't.  People 'trapped' in their homes due to negative equity also hinders future home sales as it inhibits consumers from being able to move or trade up.

Consumer home debt / GDP

The ratio of consumer mortgage debt to gdp (both nominal) was at data series highs at the beginning of the great financial crisis. Yes I know I'm comparing home debt to national GDP and not home prices but it's yet another reminder of how much debt our society has taken on.

If you are in the position to refinance and have questions give me a ring and we can talk about some of the options / pitfalls when looking for a new mortgage.

Thanks: David Merkel


  1. This comment has been removed by a blog administrator.

  2. If your loan is owned by Freddie Mac or Fannie Mae, as most are, you may be able to refinance through the Home Affordable Mortgage Program, or HAMP. This program was specifically designed to enable those homeowners with no equity to refinance their mortgages to a more affordable interest rate.

    Gmac Refinancing

  3. Very interesting post.I am glad you chose to share your knowledge through this post. I've been researching Selling or Refinancing Your House. I really like your blog and will recommend it.