This morning I read a news wire from Reuters about Obama’s newest message to the public: take advantage of some of the lowest mortgage rates in history. Over the last decade I’ve grown to be somewhat of a skeptical man regarding solutions put forward by our elected officials. This time around, I’m no less skeptical of the most recent answer to the housing crisis.
First of all, those who are suffering the most can’t really take advantage of refinancing. I’m speaking of the people whose homes are underwater, those who have lost their jobs and subsequently have damaged their credit due to financial inability to pay their debts.
Secondly, and more importantly I think, even if you can save a few hundred dollars a month by refinancing your home, the average consumer will extend the term of their loan to another 30 or 20 or 15 years just to save a few hundred dollars a month. Because of compound interest, that $200.00 dollar savings translates to hundreds of thousand of additional interest payments made to lenders.
I have to ask, based on these general and easy to understand observations: Who is refinancing good for? It doesn’t seem to me that continually refinancing debt is in the interest of American citizens. We’ve been told over the last decade to refinance our debts continuously. And whereas our payments may have gone down somewhat, the interest we pay to banks increases over the long haul and the prospects of eventually eliminating our debts just get worse and worse. The answer to the question who refinancing is good for should be obvious: it’s good for banks and the greater macro economy…not for Main Street and it’s certainly not a panacea for our overall problems on Main Street either.
From Reuters:
U.S. President Barack Obama encouraged Americans on Thursday to take advantage of historically low mortgage rates and said his administration was rolling out further phases of its plan to address the housing crisis.
“The main message that we want to send today is, there are 7 to 9 million people across the country who right now could be taking advantage of lower mortgage rates,” he told reporters during a meeting with advisers and a group of people who had taken advantage of the lower rates.
“We estimate that the average family can get anywhere from $1,600 to $2,000 a year in savings by taking advantage of these various mortgage programs that have been put in place.”
“Obviously one of the triggers of the financial crisis and now the economic crisis that we’ve suffered is that because in some areas … housing values got way overheated, in some cases you had a lack of regulation that allowed all sorts of complex financial instruments take advantage of home owners,” he said.
“We have seen a collapse in the housing market, a precipitous drop in values, and that led to our problems in the financial markets.”
I would love to refinance and take advantage of the lower rates. Unlike nearly everyone else in 2007, I put 20% down on the house I saved for in California. Now, not only do I owe more than it is worth, but my current loan to value is 130% and I do not qualify for even Obama’s refinance plan. So I am stuck paying an additional $350 useless dollars a month to my lender.
MY HOUSE LOAN IS $400000 BUT MY HOME VALUE IS ABOUT $250000 WHAT DO I NEAD TO DO . I DO NOT KNOW WHAT TO DO NOW.
I have heard that a ‘Mortgage Modification’ is the way to go…
Is it true you are able to get a lower interest rate while also lowering your principal?
Would love to learn more as I am like many other home owners who pay their mortgage on time.
The only problem is that my house has devalued over time.
I paid 470K for a home only two years ago, which is now valued at somewhere in the ballpark of 300K.
Any assistance would be extremely helpful and appreciated…
There has not been a SINGLE, sincere program implemented that truly addresses the problem. Read our lips: “WE WOULD ADORE REFINANCING! WE CANNOT!!” Why? When I lost my job (due to economic slow down), my credit card companies slashed my credit line down to what I owed, doubled my interest rate, which took me from a healthy, high FICO, to one that banks won’t take a single look at for a refi-even IF my house weren’t upside down by $75K-which of course, it is now. My mortgage is at 8%.
****GET REAL MR. OBAMA****
The majority of homeowners in this country are being sucked into a vortex of misery that is being compounded by the collective lenders looking down from their stimulus throne saying “tsk tsk tsk” – when THEY are the ones who received help from OUR pockets, and then regard US as pesky deadbeats when we apply for modification. The only difference between us and them is that THEY received a fatty check from the government, and we did NOT. We received LIP SERVICE and PROPOGANDA, and still are.
I am a former successful, HIGH Fico for life, bills ALWAYS on time, lots of equity, American taxpayer, now drowning in a sea of financial disaster, SOLELY because of what rolled out following 9/11. Period.
MY GOD I am angry about the FARCE of this “help” while our collective national debt explodes into the insane. If Obama truly wanted to help, then he would.
I naively did just what financial advisor Obama recommended. I applied for a refinance, paid for an appraisal ($550) only to be told a home I bought in 2005 for $300,000 is now worth $230,000. In order to refinance I will need to pay for mortgage insurance. So a refinance that will cost me almost $5000 will only save me approx. $45 a month. Figure it out, it will take me almost 8 years just to pay for the cost of the refinance.
Obviously, I do not qualify under his housing plan because my loan is not backed by Freddie or Fannie.
It appears that President Obama just wants us to give more money to the banks and mortgage institutions that got us into this mess in the first place besides giving them billions of taxpayer monies.
If Obama really wanted to help us he will give more incentive to lenders to reduce interest rates without having to pay for a refinance.
I paid $550 for an appraisal for a refinance that will not save me any money monthly, making it even harder to pay this months mortgage payment.
Thanks for nothing, maybe I can get my appraisal money back from one of his plans to help the average American taxpayer!