For most folks, the foreclosure problem seems very far away. Unless you, or someone in your family is hit by the specter of foreclosure it can seem a distant problem that is happening only to someone else, somewhere else. However, the fact of the matter is that one in seven mortgages in this country is currently delinquent on the payments. This means that if you walk down to the corner you are likely to pass a house where the foreclosure threat is real. It’s in your neighborhood.
This should matter to you for one simple reason, the value of your property. In fact, in the mortgage business, we often talk to realtors who feel that the market is being artificially impacted by foreclosure. They say things like “if we did not have these two foreclosures screwing up the comps, my sellers would be getting their price”. However, this line of thinking ignores the fact that the foreclosures are part of the market and they are driving prices down. Even for those current on their payments.
This is making your real estate worth less than it was before. In fact, in some markets homes are down as much as 50% in 2009. Here in the Midwest, this is not likely the case, but cuts in value up to 20% are not uncommon. So the question is what is there to do if value is decreasing? Can you protect your investment and your family’s fortunes by doing something?
The answer is yes, there is one big thing you can do, REFINANCE NOW. In fact, if you have not refinanced and have a loan above 5.50% you are losing what may be your last good chance to improve your financial situation. There are two prime reasons why this opportunity may fall by the wayside. First is another drop in value. Lenders are making it very difficult to take advantage of today’s interest rates. The number one hang up for would be refinancers is home value. If more homes in your area hit the foreclosure auction table in 2010, you will likely be shut out. The second issue is rates. In 2009 the government generally, and the Federal Reserve specifically took steps to ensure low rates. This action will stop in early 2010 and rates are likely to rise from here to somewhere around six.
To take advantage, you have one of two actions available to you. Inaction is not an option. First is the traditional refinance. Save $100 -$250 per month or so by taking a new loan for thirty years. However, better is the reduction of the term of your mortgage! Keep your payment the same, or possibly increase it by less than $100 per month and cut 10 years or more of payments off the back end of your mortgage while rebuilding the equity in your property that has been lost. You can either win a little every month or wind big in the long run. Either way you have to act now. Make is a Year End resolution to get this done now!
