The Mortgage Man
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The Three Primary Benefits of a Mortgage Refinance
You’ve heard that a mortgage refinance can be a beneficial step to take. Maybe you’re considering such a step. But what are the true benefits of a refinance? Let’s go over the three primary ways that a mortgage refinance can improve your financial situation.
1. Decrease your monthly payment. The amount of your monthly payment varies depending on your loan term length, the interest rate of the loan, the total loan amount, and other factors such as private mortgage insurance and expenses that have been rolled into the total loan amount. A refinance allows you to adjust many of these variables. If your interest rate is higher than the market’s current mortgage rates, you can refinance into a lower rate and decrease your monthly payment. This is one of the most common motivating factors behind a refinance.
2. Access home equity as cash. If you’ve built up equity in your home through consistent payments or through increased property values, a refinance allows you to withdraw some or all of this equity in the form of spendable cash. The amount you withdraw will affect the total loan balance remaining, but if you need access to money to pay for medical bills, college tuition, or other expenses, a refinance is a far better option than a standard bank loan or consumer credit.
3. Change the length of your loan term. Your original mortgage length may have been fifteen years, thirty years, or more. Either way, a refinance allows you to alter this length, and this can have a significant impact on your financial situation. Refinancing into a shorter term will increase your monthly payment amount but will save you money in the long run. Refinancing into a longer term, which is much more common, will have the opposite effect.
These are the three primary benefits of a mortgage refinance. Analyze your own financial needs and goals to determine the value that a refinance can offer you.
Bad Bank, Good For Economy
The Federal Deposit Insurance Corporation (FDIC) announced last night that it will create a “Bad Bank” to purchase the toxic assets on the books of the nations banking institutions. This was originally part of the TARP plan but it didn’t work out as planned.
The idea is that because of Mark-To-Market accounting, these toxic assets are killing banks and there is no real hope for financial recovery until Mark-To-Market is repealed or an outlet to dump these assets is created. Ideally, the best scenario would be both.
The stock market is reacting favorably to the news as it is a sign that the government is making strides in the right direction.
Mortgage Bonds Trading At Historic Highs
Today the jobless claims report came out for December with a total of 524,000 jobs lost. This was worse than projections of 500,000, but far better than rumors of nearly 700,000. So far this morning, bond traders are reacting to the rumor and not the projection by selling mortgage bonds.
As mortgage rates continue to be unbelieveably low, the stock market is struggling. Wal-Mart reported that due to one of the worst holiday shopping seasons on record, they will not meet expectations for the 4th quarter. This continues to fuel uncertainty in the greater economy, and economic uncertainty drives investors to sell stocks and buy bonds. Long term, this is good for mortgage rates and the real estate market.
Also, the FED announced yesterday that through the first 3 days of this week, they bought $10.2 billion in Fannie Mae, Freddie Mac and Ginne Mae mortgage backed securities, part of their overall plan to buy up over $500 billion in MBS’s between now and June.
The Mortgage Man 
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