Mortgage rates hit historic lows

By Elna Seabrooks
Staff Writer
    HOULTON — With the economy struggling to gain traction on a journey out of its dark recessionary slump, there is a flicker of good news for borrowers. Record low mortgage rates since the expiration in June of the homebuyer tax credits, are an option for homebuyers and even homeowners that could help spur on the recovery.
Houlton Pioneer Times Photo/Elna Seabrooks
GOOD NEWS FOR HOMEBUYERS — Rob Faulkner, vice president and branch manager of KeyBank in Houlton, said it’s a good time to refinance or take out a mortgage to buy a home as rates hit historic lows.
    Rob Faulkner, vice president and branch manager of KeyBank in Houlton, said “it behooves people to look at the rate on their bank statement and see if they can qualify for refinancing. And, obviously it’s great for people who are looking to buy a house.”
    There are a couple of ways to find potential savings on a mortgage, Faulkner added. “One way is to lower the rate and maintain the same term. The other way to help yourself is to convert from a 30-year mortgage to a 20- or 15-year mortgage.” He said the rates are substantially lower as you go from 30 to 20 to 15 years. “In some cases you may be able to keep the same payment, but, knock five to 10 years off your actual loan. So, the savings will be huge.” That’s important since interest payments can be twice the loan amount or more and weighted in the early years. Payments cutting down the principal are more substantial in the later years of the loan.
    With so much information available to consumers these days on the Internet, some of those low rates can be confusing since they may assume the consumer is paying points or additional closing costs. Typically, one point is one percent of the loan amount. Faulkner said “most people don’t like to pay points.”
    He added that if you can “better yourself by one and a half to two percent, it can make a difference if, for example, you are only four years into a 20-year mortgage. You’re talking big money over the years.”
Borrower be aware
    Faulkner said there are a number of factors to take into consideration in applying for a loan such as the number of years you plan to stay in the property. Since many people live in more than one home over a lifetime, it may not make financial sense to refinance a property if a move is planned in the near future.
    Another issue to consider is lower overall appraisals due to market conditions, foreclosures or distress sales. Faulkner said this can be a disappointment when applying for a loan. “It’s probably beneficial for everybody to visit their local bank and see what options are out there.”
    He said borrowers may also want to consider bi-weekly payments as another way to save and cut the amount of interest paid on a loan.
    The flip side of the coin is that although these are “wonderful times to be a borrower, they are painful times to be an investor or a saver,” observed Faulkner. With record lows for certificates of deposit, there are “not a lot of options for savers which can be a challenging environment for people living on a fixed income.” However, he also said it’s one cycle that will eventually switch back in time.