Jason and Dorothy Malsbury started thinking about refinancing their Lawrence home a year ago.
Their mortgage interest rate was a little over 6 percent and they thought they could get a better deal because of their good credit rating.
“We thought we could get a nice, low rate, but that wasn’t the way banks were working at the time,” Dorothy Malsbury said.
Things have changed.
The housing market went bust as home sales declined. Mortgage rates dropped into the 4 percent and 5 percent range at the end of last year.
In January the Malsburys went to Landmark National Bank, 2710 Iowa, and got refinanced. They shaved more than a percentage point from their mortgage rate and saved themselves an extra $160 a month.
“It was very easy to do – a quick turnaround,” Malsbury said. “The bank was fabulous in educating us.”
The Malsburys aren’t alone. Many people are doing what they did, according to Lawrence bankers.
“In January and February, we had the most volume we’ve ever had,” Landmark mortgage lender Brian McFall said. “I’ve been doing this for 23 years and rates are lower than I’ve ever seen.”
People are asking about refinancing at Capital City Bank, 740 N.H., as well, lender Deb Drummet said.
“It’s picked up a lot over the past couple of months. We have quite a few refinances in the works,” she said. “It’s a good time to refinance.”
Most people interested in refinancing are getting approved, McFall and Drummet said. The biggest hurdle for some is in the property appraisal. Some properties aren’t matching the county’s listed appraisal value, they said. That changes someone’s “loan to value” ratio. That could cause them to pay mortgage insurance because they don’t have more than 20 percent equity in the home. In a few cases it meant the loan wasn’t possible.
“We’ve had some of that, but we haven’t had a lot of people who weren’t able to qualify,” McFall said.
Mortgage insurance now is tax-deductible, Drummet noted.
An applicant’s credit scores also are being scrutinized more than in the past. Most recently, applicants needed a combined credit score above 740 to get the good rate, McFall said. If you don’t have a score that’s at least 620, you probably can’t get a loan, he said. Moreover, if you are borrowing 60 percent of the home’s value, you will probably get a better rate than if you are borrowing 70 percent.
“There are a lot more variables into what establishes your rate,” McFall said.
During the housing market’s boom years, some people got more expensive homes than they could normally afford, thanks to what were called adjustable rate mortgages, or ARMs. An ARM is a loan with an interest rate that changes after a set period of time. Rates can increase considerably depending on economic conditions.
Many people with an ARM are among those trying to refinance because their interest rates have increased. The Malsburys are not among them. They weren’t tempted by ARMs when they secured their initial loan.
“That’s just crazy,” Dorothy Malsbury said about getting an ARM. “Unless you are able to read everything in the contract, or you make an attorney or lender explain things to you, it’s one of the most unwise things you can do.”