Monday, June 27, 2011

U.S. Homeowners Shift to 15-Year Loan Refinancing to Add Equity

By Prashant Gopal - Jun 15, 2011 9:00 PM PT .

While millions of U.S. homeowners have negotiated lower monthly mortgage bills in an effort to avoid foreclosure, Cecelia Kirchman happily added $250 to her payment when she refinanced last August.

Kirchman took out the new loan to reduce her interest rate to 4.5 percent from 7 percent, and slice the term in half to 15 years. She said she has paid down more principal in the past 10 months than in the previous six years of owning her home in the suburbs of Washington, D.C.

“It’s unbelievable,” said Kirchman, a marketing director for a financial-planning firm who lives in a ranch-style house in Frederick, Maryland, with her husband, Mark. “For very little more each month, I’m paying it off much more quickly.”

The couple are among the growing number of “equity builders” -- creditworthy homeowners with steady jobs and enough cash to lock in near record-low interest rates and shorten the length of their loans, said Stuart Feldstein, president of SMR Research Corp., a market-research firm in Hackettstown, N.J., that focuses on financial services. Others are opting for what’s known as a cash-in refinancing, in which borrowers write a check at the closing to shrink the amount they owe on the property.

The rationale for equity building when foreclosure isn’t a threat is simple. The future interest payments homeowners can forgo by reducing the length of their loan or pumping cash into the deal is greater than what they’d otherwise earn in safe investments such as a bank account or money-market fund, SMR’s Feldstein said. As an added incentive, the 15-year fixed mortgage is the cheapest relative to the 30-year loan than it’s ever been.

15-Year Loans
The portion of borrowers refinancing in January who took 15-year mortgages rose to 29 percent from 11 percent two years earlier, according to the most recent data available from CoreLogic Inc. (CLGX), a real estate information firm in Santa Ana, California. Mortgages with 30-year terms accounted for 52 percent of refinancings in January, down from 80 percent in January 2009.

The share of cash-in refinancings reached a record 44 percent in the fourth quarter, according to data from Freddie Mac dating to 1985. While the share fell to 21 percent in the first quarter as mortgage rates climbed, it was almost double the quarterly average over the past 26 years.

“They are people who -- rather than waiting for home values to rise -- are taking matters into their own hands,” Feldstein said. “They are building equity on their own.”

Refinancing applications have increased 36 percent since the start of the year, according to a Mortgage Bankers Association index. The average weekly rate is about a third below last year’s pace as millions of Americans can’t qualify for a new loan.

Friday, June 10, 2011

Owning a Home Essential to the American Dream, Survey Shows

June 7, 2011 - Despite the ups and downs of the housing market, home owners and non-owners alike consider owning a home essential to the American Dream.

That's the key finding of a recent survey of people likely to vote in 2012 that was conducted on behalf of the National Association of Home Builders (NAHB) by Public Opinion Strategies of Alexandria, Va., and Lake Research Partners of Washington, D.C.

"The survey results show that Americans see beyond the immediate housing market to the enduring value of homeownership," said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev. "An overwhelming 75 percent of the people who were polled said that owning a home is worth the risk of the fluctuations in the market, and 95 percent of the home owners said they are happy with their decision to own a home," Nielsen said.

"Homeownership is worth the risk, pure and simple," said Neil Newhouse, a partner and co-founder of Public Opinion Strategies. "Even though the market is weak, people who don't own say they want to buy a house. Almost three-quarters of those who do not currently own a home, 73 percent, said owning a home is one of their goals. And among younger voters who are most likely to be in the market for a home in the next few years, the percentages are even higher," Newhouse said.

One of the more striking aspects of the survey results is the intensity of sentiment among potential voters, according to Celinda Lake, president of Lake Research Partners. "People believe overwhelmingly that owning a home is an anchor to the American Dream," she said. "It's an anchor to your retirement, and it's an anchor to your personal economic well-being."

Among the other survey results:

Homeownership and a retirement savings program are considered by voters to be their best investments.

80% of home owners would advise a close friend or family member just starting out to buy a home.

Saving for a downpayment and closing costs is the biggest barrier to homeownership.

Americans believe that owning their own home is as important as being successful at their job or being able to pay for a family member's education.

"Owning a home isn't just a policy to people," said Lake. "It isn't just a commodity to people. It is a core value."

This national survey of 2,000 likely 2012 voters was conducted May 3-9, 2011 by Public Opinion Strategies of Alexandria, Va., and Lake Research Partners of Washington, D.C. It has a margin of error of +2.19%.

Public Opinion Strategies is a national political and public affairs research firm based in Alexandria, Va. Founded in 1991, it has conducted more than 6 million interviews with voters and consumers in all 50 states and over two dozen foreign countries.

Lake Research Partners is a leading public opinion and political strategy research firm providing expert research-based strategy for campaigns, issue advocacy groups, foundations, unions and non-profit organizations.

To view slides on the poll, please go to

For Buying or Selling, You Need a Teacher that gives you straight answers. For more information on buying, selling, or renting out an income property in San Diego, please call Frank Rashid's cell phone at (858) 676-5250 or email him at More to follow within the next couple of weeks.