Many eager to pounce on mortgage rates

With mortgage rates at their lowest level in nearly four decades, Charlottesville-area mortgage companies are reporting a sharp spike in interest among homeowners wanting to refinance.

“A lot of us haven’t seen rates like this in our lifetime,” said Jason Crigler of Crown Mortgage Services LLC. “There’s been a lot of interest.”

The national average interest rate for a 30-year, fixed-rate mortgage is hovering around 5 percent, the lowest rate since mortgage giant Freddie Mac started keeping track of weekly rates 37 years ago.

For qualifying homeowners, refinancing can save a significant sum of money. If a homeowner with a $200,000 mortgage loan with 6.5 percent interest refinances to 5 percent, for example, the homeowner could save an estimated $130 to $150 per month and a total $30,000 to $50,000 over the life of the loan, said Crigler, who is the incoming president of the Central Virginia Association of Mortgage Professionals.

While local mortgage lenders are receiving many more inquiries about refinancing at the historically low rates, many eligible borrowers are waiting to see if rates drop a bit more in January.

“People are asking about it. People are calling and e-mailing about it,” Crigler said. “They aren’t all pulling the trigger.”

Matt Hodges of Compass Home Loans has advised many of his firm’s clients to wait a couple more weeks before refinancing. He suggests that homeowners work with a mortgage-industry professional to see if they qualify for refinancing. If they do, he said, they might want to begin preparing the required paperwork now so they can pounce as soon as the rates fall again.

“I’m convinced that rates will drop even lower in January,” Hodges said. “While some people are refinancing now, the vast majority are waiting to see what happens in January.”

Mortgage rates started falling in late November when the Federal Reserve announced it was purchasing up to $600 billion of mortgage-backed securities and other debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks. According to a Dec. 24 report by the Mortgage Bankers Association, the low mortgage rates have sparked the nation’s highest level of refinance activity since July 2003.

Refinancing is not for everyone, mortgage industry professionals said. While borrowers’ circumstances differ, they said, refinancing generally makes sense if a qualifying homeowner can lock in a significantly lower rate, such as a full percentage point less. Plus, they said, the borrower ought to consider how long it would take to repay the cost of the refinancing, which can cost an estimated $6,000 to refinance a $200,000 loan. Hodges said he tells clients to not refinance unless they can repay the refinancing charges within two years.

To qualify for refinancing, Hodges said, borrowers need an excellent credit rating, stable income, equity, cash on hand and an accurate appraisal of the home’s value.

At the University of Virginia Community Credit Union, the number of homeowners who refinanced has roughly doubled in the past month. The lower rates also appear to be contributing to a surging number of home purchases, said Peggy Deane, vice president for mortgage services at the credit union.

“Maybe this is the beginning of the light at the end of the tunnel,” Deane said.

Several Charlottesville-area real estate agents reported that they have not seen a major burst of activity on the part of homebuyers wanting to purchase property at the low mortgage rates. Yet, Greg Slater, an agent with Real Estate III and incoming president of the Charlottesville Area Association of Realtors, said he saw things pick in the two weeks before Christmas. Contributing to the uptick, he said, were the rates.

“For the people contacting me about my listings and the people coming to my open houses, interest rates are the first topic of conversation,” Slater said.

Michael Guthrie, managing broker and CEO of Roy Wheeler Realty, suggested that homeowners looking to refinance at the lower rates consider buying a new home instead. Rather than pay for the refinancing fees, he said, a homeowner could buy a new or bigger property at the low rates and, in many cases, have the closing costs covered by the seller.

“Why not get somebody else to pay these costs and get into a different property at a lower interest rate?” Guthrie said.