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Archive for Thursday, March 5, 2009

Family weighs refinancing options

Jason and Dorothy Malsbury had refinanced their home to get a better rate. They were at home Friday with their two sons Noah, center, and Zachary, and good friend Kenny Brumley, far right.

Jason and Dorothy Malsbury had refinanced their home to get a better rate. They were at home Friday with their two sons Noah, center, and Zachary, and good friend Kenny Brumley, far right.

March 5, 2009

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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.”

Comments

captainzeep 5 years, 1 month ago

craigers - I was worried about this myself but "fortunately" I am not impacted: From LA Times: "Somewhat buried in the Obama budget plan is a new restriction on the mortgage interest tax deduction (MID). The proposal is to limit the deduction to 28% for those in the top tax brackets, now 33% and 35%. That's basically households earning $250,000 a year. In other words, the top bracket taxpayer who currently would deduct $350 out of $1,000, would only be able to write off $280." "In addition, the change will not occur until 2011, perhaps muting its impact on the current housing market crisis."

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madmike 5 years, 1 month ago

Yes Craigers, that is true. I believe that it is only for those that make $250,000 a year or more. That means that a lot of people will not be making contribution to charity any more, and that not being able to deduct the interest in your mortgage will hurt the housing industry. Change we can believe in all right!

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craigers 5 years, 1 month ago

Has anybody else heard that Obama wants to possible take away mortgage interest and charitable contribution deductions in order to have more tax revenue?

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KURocks 5 years, 1 month ago

Hey KS, I disagree with you. Just because you may have an ARM, doesn't mean you purchased a home you couldn't afford. When I bought my first house fixed mortgages were at 11%. I opted for an ARM in hopes that rates would drop, and they did. Also, many people opt for ARM's knowing that they will be moving or re-fiancing in the next 3-5 yrs.

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Hoots 5 years, 1 month ago

Sorry toe but not all S & L's did the wrong thing back in the 80's just as not all Banks have been guilty today. Cap Fed has always been a solid company that has used standard and very simple lending practices. They make sure a loan is a very good risk or not and lend on that simple premise. Cap Fed is not one of the moronic speculators from the past or the present. The sad thing with this whole mess is heads should roll and people should go to prison but instead they will keep their million dollar jobs. It is so rare in this country to punish anyone with tons of money... Also if you follow the money trail to what has taken this country down the federal government was also involved in the fraud with Fannie Mai and Freddie Mac. They sold investments all over the world while lying to the investors. In large part lack of and removal of regulation...plus down right fraud in this country on the part of the public and private sector have caused a huge financial problem that ranges world wide. This is mostly the fault of our wonderful lobbyist driven government. If I had taken so much as a pair of jeans from Wal-Mart I would be in jail yet Madoff steals $50 billion and he is allowed to stay in his multi-million dollar penthouse suite. I think this speaks volumes about our so called justice system in this country.

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Godot 5 years, 1 month ago

Just refinanced for under 5 per cent. I had planned to make double payments to knock the mortgage out in a few years. That changed after hearing the details of Obama's plan to bail out the mortgage fraudsters. Obama has made it very clear that doing the right thing will get you shafted, while doing the wrong thing will bring huge rewards from the Obamanation. I'll pay the minimum, or less, and plan on having my fellow taxpayers, the minority of Americans, pick up the tab when I decide I'd rather join the majority and become a slacker.

If you can't beat 'em, join 'em.

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toe 5 years, 1 month ago

There should not be any savings and loans left after the 80's, but the government kept them around to watch them die off a little each year.

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ocean 5 years, 1 month ago

bong hits for refinancing.

we refinanced in early 2008 for 5.5% conventional 30 year and saved about the same $150 per month reduction in payment. Capitol Federal was great see Mark Hernandez there.

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number1jayhawker 5 years, 1 month ago

There's also 7 year ARMS. Anyone should be able to refinance in 7 years.

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VoiceOfReason 5 years, 1 month ago

teacher - that's exactly the point! Anyone getting an ARM, with the assumption that they'll move in 5 years is called a "speculator" and is gambling. You're gambling that the rate won't increase before you sell, that your home value won't drop and leave you upside-down in your mortgage (meaning, if you sell for the current fair market value, you take a loss), and you're gambling that there is even someone out there willing to buy your house, at all. Speculators are the leeches that sucked the life out of the housing market, initially, causing the rest of the downward spiral in our economy, which ended up hurting every hard-working taxpayer. if you can't afford the possible rate increase, you shouldn't buy the house. Gambling with an asset like your home is not smart and ARMS, with few exceptions (like when rates were astronomical in the early/mid 80's and had nowhere to go, but down. But, even then, you refinanced to a fixed rate as soon as they dropped a few points.) are horrible.

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craigers 5 years, 1 month ago

I had to pay a point for our first mortgage but we closed and got 4.875% Landmark did a decent job for us too.

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jafs 5 years, 1 month ago

Yes teacher, that's exactly the point.

If you get an ARM, you should be absolutely certain that if, for some reason, you can't sell before the rate changes, that you can afford the new payments.

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teacher101 5 years, 1 month ago

ARM a bad deal? Depends on the situation. There are lots of buyers that planned on selling their house within 5 years. ARMs generally do not change for the first 5 years and then only adjust once a year. The problem was that the people who got the ARM and were planning on moving, never moved

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Chris Ogle 5 years, 1 month ago

Positive news... man that feels good. We need more news like this.

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KS 5 years, 1 month ago

Anyone who still has an ARM, deserves whatever they get. ARM's were a bad idea from the get go. If you can't afford something, don't buy it. PERIOD! Glad to know these folks did something to save themselves some money. Good for them.

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