Interest rates have fallen to all-time lows once again. According to Bankrate.com, rate are now in the 4s at 0 Points up to $729,750 in Orange and LA Counties and $500,000 in Riverside County. And, although many people who were able to refinance the last time rates fell this low already crossed that off of their to do lists, for those who are still paying a higher rate than they should, we have been blessed with one more opportunity.
Even for people who may be upside down, if their loan is currently owned by Fannie Mae or Freddie Mac, they may still be eligible to take advantage of the low rates through agency streamline refinance programs. In our office, we were able to help a couple with NO equity lower their interest rate 1.25% and save them $326 per month! Their previous lender told them to start missing payments and TRY (with no guaranteed outcome) to modify!!!
Also, for those who are in the market to purchase a new home, now is the time to act. The rates in effect right now are beyond incredible and potential buyers, hoping for another 10% price reduction, wanting to hold out till they see it, will get crushed if rates return to anything even close to what we had one year ago (rates in November of 2008 were between 6 and 7% on conforming and FHA 30-year fixed loans). In addition to the incredible rates, in many areas homes are well below replacement cost with prices starting to come up and the $8,000 first-time buyer tax credit is still in effect.
Now, there are some areas in Orange and LA Counties that could potentially still come down some but even if prices fall another 5 - 10% in those areas, if interest rates go up just 1% from where they are now, it would be the equivalent of paying 10% more for the house (wiping out the decrease in price) and tens of thousands of dollars in additional interest over the life of the loan. And, for those who are right on the edge of qualifying for a certain amount, a 1% interest rate increase would immediately wipe out 10% of their purchasing power (i.e. approved for $400,000 today at 4.5% = only $360,000 at 5.5%).
By the way, a bit of parting perspective - the average rate in effect since Freddie Mac started posting the PMMS in April of 1971 has been 9% with an average cost of 1.42 points to get that rate.