Refinancing rates across the country are at an all time low. So, what do these refi rates mean for borrowers in New Jersey (NJ)? Read on to see the housing forecast in New Jersey, refinancing options for borrowers, and how current refinancing rates in NJ could save some borrowers an exceptional amount of money each month.
New Jersey housing forecast
Before the financial collapse in 2008, the median home value in New Jersey, according to Zillow, was $363,000. In 2012, the median home values dropped $100,000 to $263,000. As the economy repairs, New Jersey’s market continues to grow albeit at a sluggish rate. Zillow predicts the median home value will be just over $300,000 in 2017 and around $309,000 by 2018.
Two real estate associations predict mortgage rates will rise gradually over 2017. The Mortgage Bankers Association and The National Association of Realtors predict rates to average 4.7 percent and 4.6 percent, respectively, by the end of 2017.
This forecast will help borrowers determine if refinancing is a viable option for them in the near future. If home prices aren’t set to change drastically between 2017 and 2018, it’s important to consider what interest rate you’re currently locked into.
Some homeowners who secured a loan in 2008 are locked into interest rates around 8 percent. Current refinancing rates in NJ are much lower than that. As a rule of thumb, if you can secure a rate 1 percent lower than your current rate, you’re set to save money on the life of your loan.
Refinancing rates in NJ are at an all time low. This can mean massive saving for borrowers who took out a loan 8 or more years ago, or anyone hit by the U.S. recession. (Photo/Wikimedia Commons)
Refinancing options for New Jersey borrowers
Following the subprime mortgage crisis, the U.S. Federal Housing Authority (FHA) has become a major player in the no cost refinancing industry. Home equity loans, short loans, and home renovation loans are some of the many refinancing options offered through the federal government and FHA-approved banks. FHA loans include something for just about everyone, from the financially-strapped home buyer with an upside-down mortgage to someone whose home investment has paid off handsomely. Here are some federally-supported options that are paying off for New Jersey home buyers.
New Jersey home equity loans
FHA Streamline 203(K) loans are a popular way to pull equity from a home for repairs or upgrades. Sometimes this becomes necessary when a home is appraised and found to be not up to code. Other times, owners simply want to enhance the residence before moving in or renting it out. The 203(K) loans essentially combine up to 95 percent of the value of a home plus up to $35,000 to cover renovations. Each loan can be used for a one-unit to four-unit dwelling.
Streamline 203(K) loans are arranged with fixed 10, 15, 20, 25, or 30-year refinance rates. The shorter the loan, the lower the interest rates – but many people prefer longer term loans for their low monthly payments.
Energy efficient New Jersey refinance mortgage rates
Homeowners who have joined the green revolution can get loan assistance through the FHA’s energy efficient mortgage (EEM) plan. This involves the owner getting a home inspection to establish that the home complies with requirements set by the U.S. Department of Energy. An EEM loan from the Federal Housing Authority is a way to simultaneously lower utility bills and add to the long-term value of one’s home.
Upside-down mortgage loans
Many New Jersey homeowners owe more to banks than they can possibly pull from their properties. The FHA’s Short Refinance gives people the chance to refinance with affordable payments — and the resulting loan cannot exceed 115 percent of the home’s value. This loan option requires an agreement from the original lender.
Who is eligible for lower refinance rates in New Jersey?
With private companies, it’s often only the ultra-rich who get appealing mortgage rates. But with FHA, regular home buyers can enjoy some of the best deals. Certain plans will refinance homes for people with credit scores as low as 500.
Additional resources for borrowing
If you don’t qualify for the aforementioned options, you might consider a mortgage broker to secure a lower rate for you. Brokers have connections to many lenders and can easily find a program that fits your financial situation and needs.
Local banks, community bank or credit unions are also great options to consider. The non-profit structure of credit unions often translate to lower fees rates on programs like refinancing products. Credit unions that service New Jersey are: Affinity Credit Union, North Jersey Federal Credit Union, and Andrews Federal Credit Union, to name a few
Other considerations before refinancing
How does your personal financial situation look? It’s no secret that bad credit can disqualify borrowers from refinancing, or only opens the door to higher interest rate. The better your credit ratings the lower the rates. Have you set yourself up for success before applying for a refi?
The product you purchase. There is a variety of refinancing products available on the market. The best product for you will determine on your current situation.
Short term loans such like 15-year fixed mortgages can be a less expensive refinance option that a refinance product with longer terms like a 30-year option. You could also secure a 30-year loan, but pay it off in the same time you would a 15-year loan. This strategy gives you the advantage of lower interest rates and an accelerated payoff.
Adjustable rate mortgages are another option for refinancing. If you’re nearing the end of your existing loan, plan to sell your home soon, or anticipate an increase in income, an ARM loan could be a wise option. ARMs come with shorter loan terms than fixed-rate mortgages, and initially low interest.
Ancillary fees associated with refinancing. It is becoming more common for banks to charge fees, than not. Refinancing is no exception to this rule – often a borrower is on the hook to cover closing costs like escrow, settlement fees, underwriter fees, and more. If you are required to pay some of these ancillary fees, you can save more money by paying the closing costs up front. Sometimes the product with the lower interest rate can end up costing more money because of closing costs. Do the math to determine the best option for you.
Last tip: Use a mortgage calculator
The best way to paint a full picture of your refinance situation is to use a mortgage calculator. You can use a mortgage calculator to compare your monthly mortgage obligations: interest rate and total payments. You can then compare these figures to what you estimate you’ll be able to refinance for, including some of the ancillary fees you need to consider.
This knowledge will allow you to compare different types of refinance programs, different loan terms, and different lenders to see what fits your situation the best.
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