The economic stimulus package has passed Congress and is now awaiting President Bush's likely signature. In addition to tax rebates, Americans with expensive homes will be able to perform a mortgage refinance of their home loans at lower mortgage rates.
The package temporarily increases the size of mortgages Fannie Mae and Freddie Mac can purchase from $417,000 to $729,750. In many parts of the country such as New York and California home prices are much higher than other parts of the country.
Currently, loans over $417,000 are considered jumbo loans, thus ineligible for purchase by Fannie Mae and Freddie Mac, leading to higher interest rates for the loans during the initial approval and the mortgage refinance. The lower interest rates will be available only for a short time, after which the loan limits will go back to current levels.
Whoever takes advantage of the new loan limits once the bill is signed into law by Bush can save thousands of dollars in future mortgage interest by mortgage refinancing. This certainly is a better long-term benefit to qualified homeowners than the tax rebates of $600 for individuals and $1,200 for couples.
The government hopes by lifting the limits, a home loan refinancing boom ensues, uplifting the mortgage markets. The housing boom of the recent past saw housing prices skyrocket and the loan limits stay static. The new mortgage loan limits will certainly encourage new home loan refinancing. In January, mortgage application volume saw a jump, with over 50 percent of the volume composed of mortgage refinances.
The economic stimulus package includes a provision that will temporarily raise the conforming loan limit to allow Fannie and Freddie to purchase or guarantee many jumbo mortgages originated between July 1, 2007, and Dec. 31, 2008.
The homeowners affected must take advantage to refinance now before the new limits expire within 12 months. Fannie Mae and Freddie Mac can only purchase mortgage loans originated between July 1, 2007, and Dec. 31, 2008.
However, older loans refinanced between the July-December deadlines would be considered new loans under the new law. But the only thing the homeowner should be concerned with is taking advantage of the benefits provided by the new law.
Real Estate related groups which include mortgage lenders, mortgage brokers, real estate agents, home builders, and bankers have long lobbied Congress to increase the loan limits. Now with the stroke of a pen George Bush will make these groups’ request a reality, even though temporarily.
Still the homeowners have the perfect opportunity to lock in low interest rates before the chance goes away. Lower mortgage payments will free up more cash to put into a savings account along with your tax rebate check.