As mortgage interest rates dropped again this week to near historic lows, it mostly benefited people who already own houses.
More than 75 percent of mortgage loan applications nationally in the first days of August came from owners hoping to refinance, say numbers from the Mortgage Bankers Association. That is up from 60 percent in the spring.
Refinancing even an average-priced house under the lower rates -- a happy side effect of the recent economic turmoil -- can save an owner hundreds of dollars monthly.
But to get a loan, lenders want owners to have skin in the game -- at least 20 percent equity in their homes, not an easy number to hit with precipitous drops in home prices in metro Atlanta. Or they have to bring more money to put down at a closing to ensure they hit the 20 percent mark, something that more are willing to do, said closing attorney Camille Brannon, a partner at Campbell & Brannon whose four offices spread from Buckhead to Alpharetta.
"That is something they have never done before," she said. "But for some people, these interest rates are worth it. If for example, they have a $500,000 loan and the property didn't appraise enough to support the loan, they will bring in $50,000."
Willie Diggs called the decision to refinance a "no-brainer."
He and his wife, Margaret, are saving more than $300 a month on their $180,000 house in Cobb County after dropping the rate on their 15-year loan from 5.875 percent to 3.75 percent.
"Though it extended the time [to make payments], it saved me $300," the 64-year-old Diggs said. "I can save that."
Or the Diggses will have more money to spend on necessities such as the garage doors that had to be replaced this month, Diggs said.
Savings that are more modest than $300 per month can still add up and make it worthwhile for those who can get refinanced.
An owner with a 30-year loan of $150,000 at 5 percent interest will pay $805.27 a month, according to Bankrate.com. Drop that interest rate to 4.25 percent, which is about where rates are now, and the owner will save $808 a year and $24,240 over the life of the loan.
Those wanting 15-year loans like the Diggses can get even better rates.
Those kind of savings are why closing attorneys are expecting another rush of refinancings with this week's dip in rates. Refinancing hit a high of 78 percent of all mortgage loans last winter, when rates were about what they are now. Rates had crept up a little since.
"Refinancing has been subdued for the last four of five months because of tougher lending standards and appraisal issues," Marietta attorney Ken Chalker Jr. said.
"But now that rates have hit bottom again, I expect refinancing to be picking up significantly," he said. "These rates are going to get people back off the fence."
But not everyone who wants to refinance is making it as far as Chalker's office. Some who apply are turned down because lenders have tightened lending standards and because of the drop in home values.
Jeff Banks of Marietta, in Chalker's office Friday to sign final papers, said as a contractor he could get loans approved in two hours when things were booming in metro Atlanta.
"It took us weeks and weeks this time" to satisfy Banks' lender with a deluge of his family's bank statements, tax returns and payment histories, he said.
Chalker said it is also tougher because the depressed housing market, including foreclosures and short sales, has pushed values down. So a house worth $200,000 four years ago may be worth $150,000 or less this year. If the owner still owes more on the house than it's worth, a loan is nearly impossible to get.
"And [loan originators] are looking for a credit score around 720 for good, prime conventional loans," Chalker said.
Those with lower scores can get loans, but they may have to pay higher interest rates, which may not give them enough advantage to go through with it, he said.
Mortgage interest rates are tied to U.S. Treasury bill rates, which dropped as more people invested in them in the face of the recent stock market volatility.
"Back at the end of July that rate was 3 percent," Jay Bryson, a global economist with Wells Fargo Securities, said Friday. "At end of last week it closed at 2.75. Today it is 2.25 as we speak."
Refinancing can provide economic stimulus because it frees up cash for homeowners to spend elsewhere, he said. It would be a better sign for the economy if more loans were going to buy new homes. New construction means a lineup of people are back at work, from carpenters to appliance salesmen and developers.
"We think the housing market is going to be flat for some time," Bryson said. "To put it in perspective, housing starts for this year we think are going to be about 600,000 total starts. We used to build about 2 million."
"We think it is going to be a number of years before we get back to what any builder will say is even a halfway decent year."
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