Home Price Drop Effect on Refinancing Your Home

Standard & Poor's/Case-Shiller home price index released on Tuesday reported that prices of U.S. single-family homes plunged 18.5 percent in December from a year earlier as the monthly pace accelerated. There seems to be no area immune from the downward trend. As to add insult to injury, since the housing market peak in the second quarter of 2006, home prices have plummeted 26.7 percent, on average.

So how does this effect the refinancing of my home? Well, for some, it will have little or no effect, but for others, it can mean the difference between a great rate and a good rate, or even downright non-benefit for the homeowner.

The key number is 80 percent. That is, for those refinancing 80 percent or less of the value of their home, they will be eligible for current low advertised refinance rates. But, as you move up above the 80 percent ranks, interest rates will move upward and mortgage insurance will be added to your new monthly payment. Depending upon the loan scenario, this can create a no-win end game for those financing well over 80 percent of their home’s value.

But hey, this is the time to be checking on refinancing if you are looking for low rates. Rates are still near all-time lows and you may stand to receive substantial benefits by refinancing now. If you have a good idea on the value of your home and the numbers show that you would be refinancing less than the 80 percent key value, it is definitely worth a look.

Yes, credit scores also play an important role for the great offered rates. Those with credit scores above 720, coupled with a loan-to-value ratio under 80 percent are in the greatest position to close on current low refinance rates.

So, what about us refinancing over 80 percent of the value of our home, with sub 720 scores to boot? Glad you asked.

FHA refinance loans are definitely the way to go for high LTV loan scenarios and for those with credit scores in the 600 to 720 fico range. The qualified rates are almost as good as current prime conventional loan rates for those under 80 LTV and with great credit. So there is a place for most homeowners to cash-in on low refinance rates.

Again, home value is key. Have a good idea about the value of your home before getting a quote. If you are below 80 LTV for your loan scenario, then you are in good shape. Above an 80 LTV, then you will want to get a comparison between prime conventional home loan rates and FHA refinance rates.

May the Mortgage Refinance Rates be with You!

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