Mortgage Q&A: Reality of refinance isn't pretty

Interest rates have surprised the world once again, folks. The 10-year Treasury bond yield, which moves with long-term interest rates, fell to 2.94 percent on June 8.

(I’m heading out of town for a vacation and am filing my column early. By the time this is published, rates could be lower - or higher. It’s a bad time to go on vacation!)

The drop in rates obviously has increased refinancing activity as homeowners jump to cash in on lower interest rates. The tighter lending standards, however, coupled with lower property values, has decreased the number of candidates eligible to refinance.

Homeowners around the country are feeling the loss of wealth caused by their biggest asset dropping in value by 30 percent or more in some regions. Many folks become extraordinarily emotional when their appraisal comes in lower than they expected, but as long as the value meets the requirement for the refinance, it doesn’t matter.

We’re in a crazy post-mortgage-meltdown world with crazy, overreactionary subsequent regulation that is sure to be questioned in the future. I always have to remind my clients that as long as the value comes in high enough to do the deal, they shouldn’t worry about it.

To sum up the rules of the mortgage road today:

Underwriting common sense doesn’t exist. A retired couple with $1 million in the bank, lots of home equity and perfect credit cannot refinance if they have no income stream on their tax returns. Mortgagors should expect a lot of paperwork. Be prepared to explain why you took four months away from your job to have that baby. If you thought your credit score was good at 700, which used to be considered great, be prepared to pay a bit more for a refinance because your score isn’t more than 740. Don’t expect your property to appraise at what you think it will. Unless you are very lucky, your home’s value has dropped. The new rules also have increased the probability of getting a substandard appraisal report. In many cases, appraisers are assigned by a management company, and the appraiser may be from an area very different from the subject property’s area, making him or her unfamiliar with the local market.

Next week, I will share the story of a perfectly good homeowner who got emotionally involved and made the wrong decision because his home’s appraised value didn’t meet his expectations.

Don’t fight reality, folks. Property values aren’t going up anytime soon. (And I rarely make predictions.) Let’s revisit it in five years.

Refinance Questions & Answers | Yale Roth M.A., M.Ed

Like I wrote,it is my first house and first mottgage so I don’t have any experiance.could anyone explain to me what I need to be carefull almost and also explain the terms like “points” and “APR”. Curently, my mortagage is on 30years, and would…

I’d similar to to know is it a perfect time to refinance the house surrounded by at the present time even though the flea market is not devout? I bought my house 14 months ago at interest rate 6.5 and second lien at 9.25. Now I am doing refinance, new appraisal report home value shows 000 smaller amount than purchased price. so Its missing 80 or 85% equity…

If credit market so impossible, why do I grasp credit card offer within e-mail day after day, and phone call to refinance my house? sure as long as you take satisfactory money in the refinance to pay rotten the lien at closing. Otherwise your property is non-merchantable meaning that it is not insurable because of the lien and will remain that way until the lien is removed. Buena Suerte…

If I foreclose on my house, can they progress after my business? I refinanced and took extra money 4years ago? I bought my home oct’07 100% financing Not much equity yet but high interest 8.25 could I refinance using fha? I’ve presently paid off almost adjectives my debt. Possibly. FHA is doing some refi’s but you enjoy to have a certain amount of equity. …

If I purchase a home for dosh or through a private loan, how soon am I competent to refinance next to a wall? it depends on the state you live in Check your mortgage package, or appointment your state – There should be a phone listing in your newspaper work. I think what you’re asking about is the “recapture rates.” …

If I refinance and remodel my 10 yr mature kitchen will I gross the money wager on if I provide the house surrounded by 3-5 years? To answer your question, No explicitly not capital gain. If you currently own a home with a 1st mortgage and your property effectiveness has appreciated and you now want to take a 2nd loan that is considered a Home Equity Loan. Usually most lenders will not consent to the…

If I refinance my 9% rate mortgage after two years of making payments, what can I expect for a latest rate?