Finance Editor — Refinance .net

Housing Value Returns to March 2005 Levels

The Federal Office of Housing Enterprise released its statistics on the prices of homes nationwide. The report is a month by month and broken down by the nine national census districts. The data is based on the purchase prices of houses backed by Fannie Mae or Freddie Mac. So they have pretty complete underlying data to build their analysis. The current report shows statistics up until the end of November 2008, so prices are probably lower now than the report reflects. They note that prices nationwide have dropped 8.7% in the year preceding the report, and were down 1.8% in the last 30 days.

Pricing softness differs from region to region with the Western District weakest and the MountainWest region strongest. Read the report here.

Overall, while the market is weak and prices soft, it is important to realize that housing has not become worthless, its just returned to the value it held in 2005. So don’t panic. Back then those prices seemed amazingly high, and historically they still are.

Figuring out the Costs of Refinancing

Adjustable Rate Mortgages with lots of payment options have fallen out of favor, and banks are falling over themselves to help their customers refinance into more stable notes. But if you already have a stable 30 year fixed mortgage, should you consider refinancing it now?

Here are some examples of how costs might differ if you refinanced your home mortgage loan.

Case 1: California

600,000 home, purchased in 2004, with a 450,000 mortgage at 5.625
Currently paying: $2,590.45/month.
Principal: $599.34
Interest: $1,991.11
Current Loan Balance: $424,171.84

What’s left: 424,000 plus 383,000 in interest over 26 years.

If you Refinance for 30 years at 5.30, here’s what you would face:
Monthly Payment: $2,354.49
Monthly Principal: $481.82
Monthly Interest: $1,872.67
What’s left: 424,000 plus 424,000 in interest over 30 years.

You get to drop your monthly payments, but because the loan is stretching out over an extra four years, you end up paying an extra 41000 in interest over the life of the loan. Plus you have any additional closing costs and refinancing costs to put the new loan in place.

If you instead continued to make your payments at 2590 per month, at the new interest rates, you would pay of the loan in 292 months, about 24 years and spend a total of 424000 plus 331,000 in interest. a net savings of over 50,000 from the original loan and almost 100000 over the new loan.

Here’s a page with some mortgage calculators from Homecomings.Com. As part of GMAC they just got bailed out and have plenty of money to spend.