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Why it is Getting Harder for Californians to Refinance Their Home Loans
by Sheryl Landrum
CMR Columnist
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Many of us in California and nationwide have watched our home values decline in the last one to two years. We have also recently noticed that interest rates on a jumbo, or non-conforming, mortgage loan have gone through the roof as investors back away from mortgage securities. Read on to discover how a home equity line of credit (HELOC), may be able to solve both of these problems.
If your mortgage is 500,000 and your home is valued at 900,000, technically you have 400,000 in equity. However, if your home value has dropped in the last two years by 10%, your home is now valued at 810,000 and you have "lost" 90,000. Ouch! What will happen in the next two years? To protect their home's equity, many homeowners are protecting it by taking out a HELOC and setting the money aside or using it to reinvest in other areas.
What if you are purchasing a new home or refinancing a mortgage that is a jumbo loan? Mortgages that are over the $417,000 conforming home loan limit are not government backed and are now at a premium in a volatile mortgage market. Rather than take a jumbo home loan at a rate that is 1% or more than a conforming home loan, many borrowers are now reconsidering a HELOC as a 2nd mortgage on a purchase or refinance.
Remember, HELOC'S are easy to qualify for if you have good credit and, if you are refinancing or getting a 2nd on a current property, you have equity in your existing home. The process is easy too and many borrowers are able to qualify and access their cash in 10 days or so. If you are concerned about losing home equity, or high interest rate jumbo loans, consider a HELOC today.
About the Author
Sheryl Landrum is a Senior Loan Officer with First Capital Mortgage in San Diego, California and a freelance writer specializing in mortgage issues.
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