Drop In Mortgage Rates No Help For Many Homeowners

With home mortgage rates at a 37 year low, many homeowners are considering refinancing their homes. But today, many home lenders are acting less like helpful allies and more like Ebenezer Scrooge.

The one-two punch that is knocking most homeowners out of the refinance ring are declining home values and tougher lending standards, In some cases, a refinance just won't make sense for homeowners, mortgage bankers say, because borrowers would have to pony up equity and pay mortgage insurance in order to qualify for the low rates.

Some of the old rules about refinance still apply, A refinance can make sense for a homeowner who can recover the upfront costs in two years. But the current economic realities clearly are making this refinance cycle unique, mortgage bankers say.

Currently, lenders want homeowners to have at least 5 percent equity in a home to refinance a conventional 30-year mortgage, or slightly less for loans backed by the Federal Housing Administration.

But in many cases, falling values shrunk the homeowner's equity to the point that they would have been required to buy mortgage insurance with a refinance. In the short term, those insurance costs would have eliminated the financial benefit from the lower rates. Courtesy TwinCities.com