Categorized | Finance and Mortgage

Most Homeowners Unable to Refinance

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Although mortgage rates continue to drop to all-time lows, a greater majority of homeowners are unable to take advantage of the resulting refinance options. With mortgage rates hitting nearly four percent for thirty-year fixed-rate loans, lenders are growing more and more stringent with their restrictions, and are avoiding any applications that present even the slightest risk.

For homeowners that are now faced with underwater mortgages, or have simply taken a new job with lower pay, the possibility of refinancing has become an impossible task. As such, many of those who would reap the greatest benefits from refinancing are not even attempting to apply.

It is estimated that roughly eleven million homeowners, or twenty-five percent nationwide, are struggling with underwater mortgages. Three quarters of homeowners within this group have loans with interest rates far above the current market rate.

The tougher mortgage loan standards represent a complete turnaround from the standards seen during the housing boom. While banks were once too loose with respect to their lending standards, they have now become impossibly strict with them. As such, many homeowners are unable to take advantage of the currently promoted rates, and have less money in their wallet to contribute to the building of the general economy.

Many lending and real estate experts believe that if banks and the United States government would work together to modify the current refinancing program restrictions, they could positively provide a stimulus to the economy due to the increase in consumer spending power.

On the other hand, investors in mortgage-backed securities are against any potential change in the current refinancing program, as such changes would cause them to lose money due to decrease interest earnings.

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About Ella Jourgeson

Ella was recently an intern who checked all the articles for grammatical and spelling errors. She is now an all purpose writer filling in wherever we need help.

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