Low Rates Present Opportunity for Local Borrowers

For Commack residents in need of a mortgage, now is the time to get it.

Thanks to fears over a debt crisis in Europe, interest rates here are the lowest they've been in decades, a trend that could knock hundreds off of monthly payments for local borrowers, whether they're taking out a new loan or refinancing an existing one.

Mortgage rates sunk below 5 percent this spring and at the end of June, mortgage giant Freddie Mac logged the lowest rate it had ever seen – 4.69 percent for a 30-year fixed-rate loan – in its 39-year-old mortgage report.

And rates have yet to rebound. According to the Mortgage Bankers Association, a 30-year fixed-rate mortgage would again carry a 4.69 percent interest rate this week.

The situation presents a golden opportunity for local homebuyers and those who'd like to refinance.

Ed Lippert, a loan officer at Mortgage Concepts, said the record-low rates not only translate into smaller payments for borrowers, but increase the pool of eligible mortgage candidates.

"Obviously the payments are lower, so you don't need as much income to qualify," Lippert said. "In their own little circle lower rates have found a way to generate loans."

Nancy Orlando, senior vice president of credit at Teachers Federal Credit Union, said she, too, has seen an uptick in mortgage activity thanks to record-low rates.

"Rates dropped toward the latter part of April into May and we've seen an increase in loans since then," she said. "Our rate today is 4.25 percent, which is a terrific rate for a purchase or refinance."

Refinances have been the bulk of the recent activity at Mortgage Concepts.

"We're seeing a lot of people consolidating first and second mortgages into one loan at the lower rates," Lippert said, adding those who borrowed during the lending boom could be trading in rates as high as 7 percent.

Those borrowers that can lock in the lower rates could see significant savings on monthly housing bills.

A borrower who took out a $250,000 loan with a 6.5 percent interest rate would shave about $300 off of payments by refinancing at 4.5 percent.

But low rates haven't been a cure-all for the still struggling housing market in Commack and across the Island.

Home values continue to be depressed, meaning many homeowners have little to no equity available for a refinance. Most lenders will no longer allow borrowers to mortgage 100 percent of their home's value, so if they did so during the boom years, a new loan with a lower rate is impossible.

"That's where we have some issues," Lippert said. "A lot of people who have bought in the last four years don't have any room to do a refinance."

For homebuyers looking for a loan, Orlando said good credit and a solid downpayment are still a must, a lingering side effect from the mortgage collapse. It's a far cry from the pre-crisis market when lenders handed out cash without checking borrowers' income or even taking a downpayment.

"For the most part, your best bet is 20 percent down," Orlando said. "You still have the opportunity to get a mortgage without that, but it's more heavily reliant in credit."

Borrowers without a healthy downpayment, and even those who'd just like to hold on to some of their funds, can always utilize a government-backed loan. Lippert said Federal Housing Administration mortgages, which catapulted to popularity when credit dried up at the beginning of the credit crisis, still make up a huge chunk of the loans his firm doles out. FHA loans require just over 3 percent of the home's value for a downpayment.

Despite the recent lift in activity due to favorable rates, however, experts said the local housing and mortgage markets have not yet bounced back from the doldrums of the recession.

"It was really bottomed out there for awhile and it's come back some," Lippert said. "But people are still cautious."