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Will You Benefit From Falling Mortgage Rates?

By Wendy Travis
December 2008

The U.S. Treasury Department considers a plan to further reduce declining mortgage rates to 4.5%, which is more than a full percentage point lower than the current average. Are you ready to capitalize on the benefits associated with this drop?

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But before we talk dollars and cents, let's find out who can cash in on the deal. Though the dropping mortgage rates will benefit many, some wonder where they stand. Find out if you will benefit from falling mortgage rates.

Big Winners: New Homebuyers

Looking to get into the housing market for the first time? A 30-year, fixed mortgage rate of 4.5% might be the ticket. Since qualifying is based in part on monthly payment figures, if interest rates continue to fall, new homebuyers will get more "house" for their money.

Bonus: Find a reduced-price home on top of the decadently low mortgage rates for a double-savings whammy. But keep in mind that as more people demand mortgages, home prices will eventually increase.

Big Winners: Refinancers

If you currently own a home, rest assured that those dropping values may stabilize with a lower interest rate to give the market a much needed shot in the arm. In the meantime, enjoy the advantages of ridiculously low rates by refinancing (title attribute= Refinance and save with RateMarketplace) your current mortgage.

Bonus: Save hundreds of dollars every month by refinancing down to a 4.5%, 30-year fixed mortgage loan. Most financial experts recommend waiting to refinance until mortgage rates are a full percentage point under your current interest charge. In this case, you may reap greater rewards as rates drop well below this threshold.

It Depends: Struggling Homeowners

If you have difficulty making your monthly payments, falling rates may or may not benefit you. While lenders (title attribute= Find mortgage lenders at RateMarketplace) drop rates to entice applicants, the lending guidelines continue to tighten. This means that applicants with less than stellar credit may have trouble getting that low-interest mortgage approved. However, those who apply for a new mortgage before getting in too deep could still bail themselves out with the low-interest rates on the horizon.

The moral of the story? Quick action may save the day - and your house. We may live in scary financial times, but all is not lost. By keeping a close eye on the market and seizing opportunities as they arise, make the most of a difficult market and save money on your home at the same time. The rates are dropping... Are you ready to act?

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