Thursday, February 5, 2009

This is a good plan

Let's try this out.

Basically it's lowering home interest rates to 4% so people can refinance their mortgages. Getting a 4% rate would immediately help the many, many people out there who are making payments on their mortgages and didn't buy more house than they could afford. We'd have more money every month which could lead to more spending which could help the economy. In times of economic trouble, let's not just help those who are totally screwed, but also those who are teetering on the edge.

Write to your congressman - insist they support this plan!


Mathman said...

I am all for this and hope it happens! Perhaps I will write to my congressman, although I do not have much hope of swaying him on the issue.

Robyn said...

though this sounds good and all, and overall I like the idea in general for some situations, I do have some concerns about it. first of all, refinancing costs money. there's the appraisal and the closing fees, to name just a couple. theoretically, the fees could be rolled into the mortgage, but the appraisal won't be.

also, refinancing assumes that the home owner can get a loan to cover their original mortgage. based on falling housing values, that's not a safe assumption. that is to say, if person A paid $100K in the inflated market, have built up $5K equity, but the flailing market [new appraisal required in many cases] indicates the house is only worth $80K... where is the additional $15K going to come from?

Matt said...

That's a good point, Robyn. I wonder though if the appraisal issue won't have as much impact here in Iowa where home values are still pretty stable.

Robyn said...

Not in my experience, unfortunately. When we were looking at refinancing back in May or so of 2008, though we'd owned our house less than two years, we still needed to get an appraisal done. As I recall, that would have been about $500.

Even more, because of some wonky law in Iowa, we couldn't get an independent appraisal done and use it to compare rates at various banks. The banks have to contract the appraisals directly, and they are apparently exclusive to that particular bank. Obviously I could call up a couple different places and get general rates and such, and even get pre-approved, but until they know the value of the house, the deal won't go through. Which means if we want to get the real nitty-gritty between banks, we would have had to pay for more than one appraisal.

The upshot being that we had to choose a bank based on the information going in, and hope for the best once the appraisal came back.

Because we have so little equity because of not having our house long, and with the falling values, we opted not to do it at all, because the credit union rep was pretty certain our house would not appraise at or above the amount we needed.