New Rush to Refinance Homes

December 22, 2008 2:07:01 PM PST
Earlier this week the Federal Reserve made a surprise interest rate cut.An unexpected side-effect of that cut was a drop in mortgage rates.

A thirty-year fixed rate mortgage is about five and a half percent close to the historic low set back in June of 2003.

This new low rate could save one Fresno family some much needed money.

Betty Jo Turk moved into her home in the Hampton renaissance subdivision in northwest Fresno a year and a half ago and financed it with a 30-year fixed-rate mortgage of 6 percent.

"It's David Schilling. Hey, did you get my voice mail a few minutes ago?"

But after a call from Turk's broker about a lower mortgage rate, Turk and her husband decided to refinance their home at five-point-three percent.

Betty Jo Turk, Homeowner: "We were dancing around. We actually went out to lunch. My husband and I work different shifts so we had to go out to lunch to have a little celebration."

After a surprising three-quarters of a point federal rate cut Tuesday, to help the ailing economy, the mortgage rate dropped as well.

This time last year, a 30-year fixed rate mortgage was six-point-22%.

A week ago it was five-point-75%.

Now it's five-point-48%.

Mortgage broker David Schilling says it is unusual for mortgage rates to respond this way.

David Schilling, Mortgage Broker: "Because of the uniqueness of the volatility of this market that we got and the unpredictability it actually had a positive 'hey I heard the rates got cut?' 'Hey, yeah.' 'Great.' 'Come on down we'll get you signed up."

But schilling warns not every home owner can refinance.

Poor credit scores and lost equity on a home bought with 100 percent financing make it more challenging to get in on the new rates.

"A new lender does not want to step in and take over that burden. They say, 'I'm not gonna lend you 300-thousand on a house that appraises for 250. so those people are in trouble."

With this new mortgage, Turk will save 400 dollars a month. Her son has congenital heart disease and the medical bills are piling up. Turk hopes this money will help pay some of those bills.

"This is like finally 'woosh' maybe we didn't make the wrong decision for us."

Each homeowner's mortgage situation is different, so analysts recommend sitting down with a broker to make sure refinancing is right for you.


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