Stable Home Prices Makes Refinancing an Option for Houston Homeowners

By Richard Barrington
Local Lender Columnist
Apr 11, 2008
While home prices fell throughout much of the country, they have remained relatively stable in Houston over the past year. This keeps more options open for Houston area homeowners, including the possibility of refinancing a mortgage to ease some strain on the monthly budget.

How Refinancing Can Help

Refinancing can help a homeowner manage the monthly mortgage bill in three ways:

• Stretching payments over a longer period of time, while costing more in the long run, should ease monthly payments.
• If interest rates have fallen, refinancing is a way to save interest expense over the remainder of the mortgage.
• Switching from an adjustable rate to a fixed rate mortgage makes budget planning more predictable.

Refinancing Depends on Home Equity, Which Depends on Home Prices....

The reason why some homeowners in distressed real estate markets are not able to take advantage of these refinancing options is that falling home prices have wiped out their home equity cushions. Normally, home equity builds as you pay down your mortgage, but if home prices fall quickly enough, that can wipe out your home equity.

Mortgage companies are not going to write a loan for more than the value of your home, and these days, they are less likely to write a mortgage for 100% of the value.

Houston area home prices in October of 2007 were within half a percent of where they were a year earlier. Given all the variables involved, a half a percent is essentially no change at all. Compared to double-digit drops in some parts of the country, this represents an enviable level of stability. That stability preserves home equity, and leaves refinancing options open for the average Houston-area homeowner.

Source

Houston Chronicle

About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.