MORTGAGE RATES » Home Mortgage Loan News

Despite buying a new home and securing a decent mortgage rate of 6.125 (traditional 30-year fixed) in October of 2008, homeowner Janice decided the time was right for her to refinance in February in 2009.

The result was a new rate of 4.875% (same terms as original loan), with no points and reduced closing fees. If Janice is to maintain this mortgage to its full terms the total savings will be close to $50,00o.

Depending on your scenario, refinancing now is an excellent way to save on your mortgage as interest rates are at historic lows.Janice said, "The move just made financial sense, since we [her husband and herself] plan on staying here for at least ten years."

By refinancing her mortgage, Janice is saving over $165 a month. Sure it will take her about two years to break even on the closing costs, but since she and her spouse are committed for the long hall, the expense and effort was well worth it.

Those who are either in an adjustable rate mortgage or can reduce their fixed mortgage rate by a full percentage point should start crunching the numbers to see if refinancing can help them save on their mortgage payments. The calculations and contemplation is as simple as using a great online refinancing calculator to see if paying the upfront fees such as appraisal costs, title transfers and notary public charges is worth the expense of refinancing your current mortgage.

Individuals contemplating refinancing their mortgage first need to address their long term goals to ensure that any steps take are well worth it.

If you are considering refinancing to save money you need to commit to at least five years in your current home, calculate the amount of closing costs and the break even point of the investment and then decide if refinancing your mortgage to save money is the right strategy you and yours.

Homeowners in foreclosure may be able to take advantage of a special program Fannie Mae is initiating to help its customers to stay in their homes by renting. Known as the "Deed for Lease" program, homeowners who don't qualify for loan modifications are allowed to transfer their property to Fannie Mae in exchange for a lease.

How the Program Works

Homeowners who don't qualify for a loan modification can rent their home instead. Fannie Mae will allow homeowners to pay market rents, which for the most part are cheaper than mortgage monthly payments. In most cases, the lease will last for one year. If the lease expires, the lender may offer extensions.

Why They're Doing It

One reason Fannie Mae is taking on this strategy is to give homeowners time to come up a way to move. In addition, Fannie Mae says it is looking for ways to keep neighborhoods occupied rather than leaving homes empty, which can drive down home prices even further, partially because they're not well-maintained when empty.

If the home prices were to drop, Fannie Mae would have a more difficult time selling them at reasonable prices when the time comes. The lender is hoping that the overall housing market will be stronger a year away. Even more, the company would still be able to bring in some income until the house is sold.

Will It Really Help Homeowners?

There are a few benefits for homeowners who take advantage of the "Deed for Lease" program:

• Cheaper monthly payment: Since Fannie Mae will be using market rent rates, renters will likely be paying less than they did on their mortgage.
• Housing security for at least a year: Since homeowners will sign a lease that lasts at least a year, and Fannie Mae won't list houses for sale, they will be given the security of knowing they'll have stable housing for a while.
• Outside maintenance: Fannie Mae plans to hire a professional maintenance company to take care of the homes, something the homeowners previously had to do on their own.

Lender Freddie Mac offers a similar deal to its customers, two-thirds of which have already taken advantage of it. Fannie Mae anticipates similar success with its program.

Do you think an owner-to-tenant program like "Deed for Lease" is beneficial to homeowners facing foreclosure?

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