Rising home values as a result of an improving economy, and interest rates at a new low for 2014 makes it the perfect time to consider buying or refinancing a home. Interest rates on mortgages are at the lowest they have been in 18 months and home buyers are entering the market in droves. The low rates give them more buying power, and rates are continuing to go down. The great home prices have given buyers the edge, but the new low interest rates have started prompting existing homeowners to look into refinancing to get better deals and save more money. Current studies show that refinances are at the highest they have been since March, and millions of people who are saving money on their mortgages are “in the money.”


Conventional mortgage interest rates on 30 year mortgages with fixed rates are listed by Freddie Mac at an average of 3.99 percent. Banks are showing even lower numbers in many cases, and excellent APR rates.

In addition, the FHA and VA loans are giving homeowners rates in the area of 3.25 percent when points are paid for at the time of closing. These low rates can mean hundreds and even thousands of dollars of savings every month for homeowners.




According to Ellie Mae, the leading lending software provider for banks, in the month of October, over 40% of all real estate mortgages were granted as refinance loans rather than new home purchases. That figures marks a 4 point increase from the previous month, and the highest refinance ratio vs. purchase loans since March of 2014.


Low interest rates are a big reason for the increase, but there are other factors as well giving homeowners a push toward re-working their mortgages.


One other reason for the jump in refinances is the increase in home values that have shown a steady climb. The value of personal real estate has climbed back 20 percent in most major cities including Las Vegas, San Francisco and LA. Those higher home values have been putting money in homeowner’s pockets either from sales or from refinancing. Higher home values have also made it possible for homeowners who were struggling with reduced values to refinance now, especially if they were not eligible for HARP loans.


Another reason for the increase in refinancing is that the average homeowner is just now becoming aware of the mortgage loan atmosphere and the low rates. The weekly mortgage survey by Freddie Mac showed that 30 year mortgage interest rates were below 4.25% for most of this year.


Many U.S. homeowners are able to refinance but were unaware of it. Amongst those that have been eligible for refinancing more than 722,000 were eligible for the refinance program to help with the difference of value caused by the real estate fallout in the early 2000s. This program, known as HARP, or the Home Affordable Refinance Program is out there for many homeowners, but they have not taken advantage of it. It isn’t because the government isn’t trying to get the message out there and give people the relief they deserve. The director of the FHFA has even gone on a city-by-city schedule of appearances to explain the program to anyone interested. The FHFA also lists all eligible households on their website in a state by state list. Homeowners who take advantage of HARP loan availability typically save up to 30 percent when they refinance their loans.


In addition to the savings of an adjusted home value through the HARP loan, home owners are getting better payments due to the low interest rates, and current FHA homeowners and homeowners with VA loans can take advantage of the streamlined refinance application process to make the whole experience less stressful and faster.


Using the refinancing available has allowed many FHA homeowners to get rid of the FHA MIP payments. It is a fantastic time to refinance existing mortgages and save money.




The good news isn’t just for existing homeowners. Falling rates in the mortgage industry have made the rent vs. buy question an active conversation in many households once again. The math has been difficult in the last decade, but with demand rising, homes selling at record rates and interest rates considerably lower than they have been in the last months, the shift back to buying a home is increasing.


Along with buyer activity, refinancing is showing steady increases, and FHA refinances have gone up two percentage points in the market share in the last month. That represents the first time in a year there has been an increase of two percentage points.


FHA remains a popular option for buyers because they are so accessible to first time buyers as well as to repeat home buyers. Thanks to the streamline refinance ability for both FHA and VA loans, refinancing to take advantage of the new low interest rates are up as well.


Typical FHA loan down payments can be as low as 3.5% with credit scores in the 580s making home buying possible for renters who want to make the leap into home ownership. Low interest rates, low down payments and credit requirements with FHA loans also make it easier for home owners who want to move up get their new dream homes.


The streamline program developed by the Federal Housing Administration makes it simple to refinance. The program uses information from the previous loan as long as the homeowner will save at least 5% on their new mortgage with the program. New low interest rates have made that 5% an easy figure to reach.


Ellie Mae started tracking VA loans this year as well, and is showing a significant increase in refinances using the IRRRL program, also known as the Interest Rate Reduction Refinance Loan. Similar to the FHA’s streamline program, the IRRRL les homeowners refinance if they can establish a minimum monthly savings as a result of the new loan. These types of refinances are expected to continue growing through 2014 thanks to the continued drop in interest rates.