Thanks to falling mortgage interest rates, a Perrysburg homeowner suddenly has $230 a month extra to sock away in savings, pay bills, or splurge on a Cancun getaway.
"Refinancings are up this year compared to last year," said mortgage broker Shane Marzullo, who got a client a
30-year, 4.75 percent interest rate that cut his house payment to $1,562 a month from $1,792.
With interest rates on home loans dipping below 5 percent in recent weeks, mortgage bankers and brokers in the Toledo area have been besieged by homeowners eager to refinance.
"We are swamped with business," said James Hoffman, president of KeyBank of Northwest Ohio.
"There has been a substantial uptick in activity," added Ralph Vinciguerra, president of Northern Ohio Investment Co. in Sylvania.
Driven by the opportunity to replace mortgage rates of 6 percent and higher, homeowners applied for $88 million in home loans at Fifth Third Bank of Northwest Ohio last month. That was 2 1/2 times the application volume in November, said Elizabeth Kollar, senior vice president for consumer lending. And January is on track to approach December levels.
The story was the same at
Huntington Bank of Northwest Ohio. "It's a significant increase," said Mike Rose, senior vice president.
At Northern Ohio Investment, which specializes in mortgage loans, applications for refinancing are "several times what we saw at this time last year," the president said.
Nationwide, an index that measures refinancing activity rose 26 percent for the week of Jan. 4 from the prior week, according to the Mortgage Bankers Association. The index is at its highest level since mid-2003.
The development is a reaction to the Federal Reserve's attempt to stimulate the economy by dropping to near zero the rates banks charge each other for certain short-term loans.
That money in turn is supposed to be used in part for consumer loans.
But loan applications for home purchases locally have not increased significantly, bankers said.
Average interest rates nationally last week were at 4.96 percent for mortgages with a 30-year term and 4.65 percent for 15 years, Freddie Mac, the government-owned mortgage giant, reported.
Rates tend to be slightly higher in the Toledo area, explained Mr. Marzullo, of Greentree Mortgage Services in Holland. Typical mortgages locally are 5.125 percent for 30 years and 4.75 percent for 15 years, he said.
Rates were slightly lower at one point earlier in the month when the mortgage broker helped the Perrysburg homeowner refinance a $300,000, 6.125 percent loan, he said.
Mortgage bankers locally say that the volume of applications - most for refinancing rather than home purchases - is approaching boom time levels of earlier in the decade.
Business likely would be even better, but many homeowners don't attempt to refinance either because their credit record has deteriorated or they owe more than their home is worth, bankers said.
An economist at mortgage giant Fannie Mae was recently quoted as saying 70 percent of homeowners nationally fall into that category.
Falling home values are the biggest problem locally, bankers said.
Mr. Rose, of Huntington, estimated that about a quarter of local homeowners seeking to refinance at Huntington fail to qualify.
Among successful applicants, 30-year mortgages are more popular, he said. "There isn't a significant rate difference between 15 and 30-year loans," the banker explained. And because prepayment penalties are less common than they once were, borrowers have the option of repaying the note early.
"Customers in northwest Ohio are looking for the cash flow," Mr. Rose added.
Ms. Kollar, of Fifth Third, said it is too soon to say how many recent applicants for refinancing will fail to qualify.
The recent upsurge in applications is especially gratifying because the first few months of the year are typically slow for mortgage bankers, she added.
Ms. Kollar urges homeowners who are unsure about the benefits of refinancing to talk to a mortgage banker. In some situations, even if borrowers have loans with relatively attractive rates, they can reduce the term even if the payment stays relatively stable.
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