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Health & Fitness

2012 Will be the Year of the Re-Fi.

Thinking about refinancing your home, but haven't taken the leap yet? Waiting for the rates to drop another 1/8 point? If so, 2012 may be the year of reckoning for you. Find out why in this post.

Nothing Lasts Forever.

Including home mortgage rates.  If you are one of those homeowners who has been contemplating refinancing your home, but for whatever reason you haven't pulled the trigger yet, then this post if for you.  Over the past 4 years, we have seen interest rates for new home purchases and re-finances bounce along at historic low levels.  Part of this is caused by the downturn in the global economy, and part driven by unprecedented steps by the Federal Reserve in keeping the housing market on life support while we worked through the recession.   Either way, it has seemed like just when you thought rates couldn't go lower, they did.

It was only a year ago when we were stunned to see the rate on a 30 year mortgage drop below 5%.  Now that same loan can be had for under 4%!!!

But the economic ground underneath us is slowly changing, and the rock-bottom rates on home mortgages we have started to take for granted may start to inch up in the latter stages of 2012.  

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There are two factors behind this:

It's the Economy.

The economy on the Peninsula is heavily influenced by the technology sector in Silicon Valley.  And by all indications, the Valley is on the move again.  You only need to observe the traffic gridlock on 101 and 280 during the commute hours to know that the Peninsula is back at work again.  Tech companies are hiring again, and money is flowing back into startups.

Find out what's happening in San Carloswith free, real-time updates from Patch.

Even the nationwide economy, which always lags our own micro-market, is showing signs of improvement.   The nationwide unemployment rate just dropped to the lowest level in several years.

Interest rates tend to shadow the health of the economy -- as the economy picks up steam, rates rise along with it.  The Federal Reserve will even use the prime interest rate to throttle the growth of the economy and manage inflation.  I know it's hard to fathom inflation as we're just coming out of a recession, but everything happens in cycles.    

The Fed Promise.

In 2011, the Federal Reserve took an unprecedented step of "promising" to keep the prime rate at or near zero until mid-2013 to help stimulate the housing market.  This is the rate at which lending institutions borrow money, and has a direct influence on the mortgage rates that we pay.  If the Fed holds to this promise, that means 2012 is the last full-year that these rates will be a sure bet.  And I wouldn't be at all surprised to see them abandon this commitment if the economy grows at an unexpected rate.

If You Take the Jump...

Timing is important when re-financing your home.  If you choose to re-finance your home during the peak buying cycle in the spring, then you'll need to have lots of patience.  Why?  Financial institutions always give priority to new purchases over refinances, because new home purchases are on a contractually driven timeline (the purchase contract), whereas refinances are not.   Consequently, loan processors and underwriters will always place new purchases at the top of the stack over re-fi's.    

If you need the names of some outstanding mortgage consultants at either Wells Fargo, Bank of America, or even an independent broker, just shoot me an email and I'll be happy to pass their info along to you.

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The Square Foot Blog:Straight Talk on San Carlos Real Estate is written by Chuck Gillooley -- San Carlos Resident, Realtor, and author of the White Oaks Blog.

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