Boston Real Estate Lawyer – Boston Condo Refinancing Rates

On December 30, 2008, the Federal Reserve announced that in January 2009 it would begin buying mortgage-backed securities to stabilize the United States housing market. According to news reports, the Fed will purchase securities from mortgage giants Fannie Mae and Freddie Mac, as well as Ginnie Mae.

Investment banks created mortgage-backed securities by buying mortgages, usually residential mortgages, from lenders. The banks pooled these mortgages, and issued securities that entitled investors to a portion of homeowners’ interest and principal payments. When homeowners could not make their mortgage payments the housing market collapsed, and the market for these esoteric securities followed soon thereafter.

Just ten days before the Fed’s announcement, with interest rates hovering around 5 percent, the Mortgage Bankers Association reported that mortgage applications had jumped 48 percent. The Association’s Refinance Index reflected a 62.6 percent spike in applications for refinancing.

According to Freddie Mac, the average rate on a 30-year mortgage dropped for the eighth straight week to 5.14 percent just before the Christmas holiday. That rate was the lowest in the 37 years the company has been surveying interest rates. Similar data from Bankrate.com showed 30-year mortgage rates at 5.27 percent. The Mortgage Bankers Association described an interest rate of 5.04 percent.

In mid-December 2008 the Fed also cut the target federal funds rate to between zero and 0.25 percent, the lowest rate in history (this is what news reports mean when they refer to cuts in interest rates). Cuts in the federal funds rate do not directly affect mortgage rates, however they can be an indicator of falling rates for mortgages.

The federal funds rate is the rate at which banks lend money to each other overnight. Banks are required to keep a certain amount of reserves on hand with the Federal Reserve, generally 10 percent. If a bank makes a loan, and falls below the 10 percent threshold it can borrow from another bank that has a surplus.

For some, the lack of privacy may be a negative, but someone living alone may enjoy the security of knowing others are close by. Owners not only share condominium fees, but parking, laundry rooms, sidewalks and other common areas. A homeowner with a pool can invite as many guests to a pool party as she desires; condominium associations can restrict the number of guests or the hours when festivities can be held.

These lower rates have created a very favorable climate for mortgage borrowers. Even with heightened lending guidelines in the past few months, borrowers with good credit can take advantage of these low rates to maximize their purchasing power. This is especially true for first-time home buyers in the Boston area, who can take advantage of lower sale prices, particularly in the condominium market, without having to be concerned with a lower resale value of their own home. While prices have dropped, the Boston condominium market remains strong, with values holding well compared to other sectors of the housing market.

Contact a Massachusetts Real Estate Lawyer

To speak with an experienced Boston real estate lawyer about refinancing, phone Parker Scheer LLP seven days a week, toll free at 866-414-0400 or contact Rob D. Stewart. All information furnished will be kept strictly confidential.

Related Articles

Parker | Scheer – Massachusetts premier real estate lawyers

Buying a house in Massachusetts

Buying a condo in Massachusetts

Reviewing mortgage documents

What is title insurance and do I need it?

Purchase and Sale Agreements in Massachusetts – Buyer’s FAQ

Reverse Mortgages Pros and Cons