December 5, 2008

BIRMINGHAM, Ala. - UAB assistant professor of Real Estate Lary Cowart, Ph.D., is available for comment on the recent resurgence of home refinancing. According to a Wall Street Journal Dec. 4 report, applications to refinance home mortgages have tripled in recent weeks for the largest increase on record by the Mortgage Bankers Association. A mortgage interest rate drop of .5 percentage points is behind the growing number of applications, Cowart said.

"This is a very good time for home owners with mortgage rates near or above 7 percent to consider a home refinance," Cowart said.

Cowart said owners must meet two crucial criteria before choosing to refinance.

"First, the current mortgage rate should be a full point below what you are currently paying," Cowart said. "So considering today's refinancing rate of 5.75 you should be currently paying an interest rate of 6.75 percent or more to realize any true savings on a refinance.

"Second, you also must be planning to stay in your home for at least two years after the refinance to offset the added closing costs connected to refinancing and realize any potential profits from the decision."

Cowart also said there is good news on the horizon for new home buyers after reports this week that the U.S. Treasury could use its resource to force the rate on 30-year fixed loans for home purchases down to 4.5 percent.

"If the program is implemented, it would offer unprecedented low interest rates to new home buyers," Cowart said. "That means thousands if not millions of people that couldn't afford to home before could afford it now.

"It would increase demand for new and existing homes, which could offset the rash of foreclosures and help stabilize the housing sector," Cowart said.