TedCo Software Financial Matters Blog

Can you be helped by the President’s “Making Home Affordable” plan which is designed to help distressed homeowners refinance or modify their mortgages?

FinancialStability.gov is a new government web site that can help you find out if help is available for you.

The four basic eligibility requirements are addressed by these questions:

• Is your home your primary residence?
• Do you have a Fannie Mae or Freddie Mac loan?
• Are you current on your mortgage (haven’t been more than 30 days late in the last 12 months)?
• Is the amount you owe on your first mortgage about the same or less than the current value of your home?

Even if you don’t believe you will qualify for help refinancing or getting a loan modification, you should still work through the evaluation pages at FinancialStability.gov. You don’t have to enter any personal information to explore the site and if you don’t qualify, the site offers suggestions about other options you can pursue.

The Federal Reserve cut the federal funds rate from 1% to a range of 0.0% to 0.25% this week. Homeowners immediately started taking advantage of the reduction in interest rates by refinancing their homes to a lower monthly payment.

The MSNBC.com story is titled, “Fed rate cut sparks a rush of refinancing“.

If you are interested in refinancing, the Refinancing Calculator in Real Estate Calculator Suite is a great tool to use for determining the effects of refinancing. It shows you the savings a refi can offer in terms of time and money. And it’s easy to use.

For those with good credit and the ability to make a healthy down payment, the current rates for refinancing into a fixed, conventional loan are now as low as 4.5%.

But how do you determine if refinancing will be a good financial move? Sometimes it’s not. There are many scenarios where refinancing is almost always a bad idea. If you plan to sell your house next year, you’ll probably not live in the house long enough to recoup the costs of refinancing through the monthly reduction in payment. If you already have a very low interest rate, refinancing with costs may be only a break even effort over the long term.

With rates as low as 4.5% though, refinancing will look good to a lot more people. But a caution is in order. Refinancing is best done when only the remaining balance is refinanced. Suppose the purchase price of your home was $200,000 and you’ve paid it down to a $150,000 balance. A simple refi of $150,000 is usually the best approach. If you refinance the full value of your home (also called a “cash out refi”), your payment will be higher than a simple refi and your debt will be greater. You’ll be buying your entire home over again!

The 16 real estate and mortgage calculators in Real Estate Calculator Suite, $39.95 US, give you the ability to play with your own numbers as you consider a real estate purchase. The Refinancing Calculator is an example of how Real Estate Calculator Suite “makes real estate math easy”!

Download an evaluation copy of Real Estate Calculator Suite and try the Refinancing Calculator. Here’s a screenshot to give you an idea of how simple it is to use.

(Click the screen shot to see the full sized image)