Recent Mortgage Rates Have Made Refinancing Attractive. But Are Other Options Better?

Posted by  on Apr 08, 2010

Mortgage Refinance Deals Popular

According to the Mortgage Bankers Association, nearly three-quarters (74.4%) of all mortgage applications are currently for refinancing. With the low interest rate offerings, that makes sense.

Although rates have fluctuated some since hitting an all-time low recently, some of the best mortgage deals ever are still out there.

So, for many, the chance to tie up a fixed-rate home loan for 30 years at one of the lowest mortgage rates in history is a once-in-a-lifetime opportunity.

Not So Fast

But why refinance your existing home when you could trade up, and still possibly have with the same monthly payments?

The New York Times recently reported National Association of Realtor figures that suggest properties in foreclosure often sell for 15 or 20 percent less than comparable homes sold in the typical way. So, if you're lucky, you could sell your home for $300,000 (if that's its value), and buy another worth $360,000 without increasing your mortgage loan.

In some areas, you may do even better. A survey published by Trulia.com and RealityTrac found that:

Consumers expect to get a lot for their dollar when purchasing foreclosed homes and are willing to invest: nearly two out of three U.S. adults (65 percent) expect a discount of 30 percent or more when buying a foreclosed property. Respondents in the Northeast expected the biggest discounts, with 43 percent expecting foreclosed homes to be discounted by 50 percent or more.

All This, and a Tax Break, Too

Depending on your circumstances, you could be eligible for up to $6,500 in home buyer's tax credit. The government recently extended the scheme to include most existing owner/occupiers, as well as first-time buyers.

No wonder the survey reported that 88 percent of those who are thinking seriously of trading up say they'll consider buying a foreclosed property.

Be Careful

The New York Times piece highlighted some potential pitfalls. To start with, you should make sure that the bank from which you're buying has cleared the title, so you're not stuck with outstanding property taxes or other liabilities.

Next, be prepared to act. For obvious reasons, cash buyers tend to get the best deals, but you can at least make sure you're pre-approved for your mortgage loan before you fall in love with your dream house.

And finally, nothing in life is free, so you may have to work hard at getting a great deal. Be prepared to research the marketplace aggressively, and to act quickly and decisively.

Compare Mortgage Rates First

Whether you're thinking of buying a foreclosed property, purchasing any other home, or refinancing your existing loan, your first step is to compare mortgage rates.


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