Steve Hartman purchased his first home this month. Four days later, he refinanced the mortgage. Even as a just-released report showed Springfield-area home sales down nearly 36 percent in November compared to a year earlier, lenders report a boom in refinancing thanks to the lowest interest rates in decades.
Steve Hartman purchased his first home this month. Four days later, he refinanced the mortgage.
Even as a just-released report showed Springfield-area home sales down nearly 36 percent in November compared to a year earlier, lenders report a boom in refinancing thanks to the lowest interest rates in decades.
In Hartman’s case, he figures refinancing from a 5.8 percent to a 4.75 percent on a home recently purchased in Rochester will cut his monthly payment by about $100 as well as $36,000 from the life of a 30-year, fixed-rate loan through CEFCU, a Peoria-based credit union.
“It was a pretty good rate for a while, and then it went down … it was a whole percentage point,” said Hartman, an Internet technology specialist for the Illinois State Police in Springfield.
Area lenders, some of whom have shifted staff to handle the volume, said demand for refinancing took off soon after federal regulators began driving down interest rates as part of efforts to revive the national housing market.
As a result, 30-year, fixed rates are available at or below 5 percent, and some experts expect rates to fall again.
“It caught everyone by surprise. No one expected rates to take this big of a drop in a month,” said Gregg Formigoni, vice president of mortgage banking for Illini Bank of Springfield.
Formigoni said refinancing has been steady since shortly after Thanksgiving, adding that most of the demand has been in 30-year, fixed-rate mortgages.
“It’s truly amazing. A lot of that is reflective of the timing. They are concerned about the economy and their personal budget,” he said. “The news is so dramatic. It’s almost as if you wait a day, and the news is different.”
Town and Country Bank president Mike Houston said the bank temporarily has shifted personnel to the mortgage department to handle the demand.
“They’ve done nothing but deal with people seeking refinancing. It’s been one right after the other. We’ve taken people from other areas who have mortgage experience to jump in and help,” Houston said.
Marine Bank in Springfield temporarily stopped taking refinance applications as a result of heavy volume.
Executive vice president Dave Bramlet explained that lenders have a 30-day window to lock in a rate once it is committed to the homebuyer, and the sheer volume left too little time to meet the deadline in some cases.
“Our (mortgage) pipeline about a month ago had $12 million in it; today, it’s over $70 million. We’ve taken 500 applications in the past three weeks,” said Bramlet, who added that the bank would re-evaluate acceptance of new refinance applications each week.
“We service over 4,000 loans right now, and to have 500 in the first few weeks, we know there’s more out there,” Bramlet added. “We want to accommodate them as fast as we can.”
Athens homeowner Vickie Reese was among customers of the bank that got in early, refinancing a 6.375 rate through Marine Bank to 4.625 percent. She closes Jan. 1 on a new 30-year mortgage.
“It should save $100 to $150 a month. I’m pretty happy with that, and I didn’t want to take any chances it would go back up,” said Reese, who is a recruiter for a financial services company in Springfield.
Security Bank of Springfield, which normally would take walk-in applications, has begun suggesting refinancing appointments, said Bridget Moore, who is first vice president of lending.
“It’s all hands on deck. We’re getting a lot of help from other areas of the bank,” Moore said. “There’s a lot of concern rates will go back up, and everyone wants to catch that wave while rates are low.”
Local lenders said closing costs on a refinanced mortgage typically range from $500 to $1,000, depending on the institution and loan terms. Consumers also should ask about reappraisal costs, title fees and closing points.
Hartman said, as a first-time homebuyer, he also encountered the stricter lending standards that have resulted from the national credit crunch and rising mortgage foreclosures
“They checked every single reference and every single deposit. They wanted to make sure it was my money (for the down payment),” said Hartman, who added that he would consider refinancing again, if rates continue to fall.
“It’s kind of like playing the stock market,” he said.
Tim Landis can be reached at (217) 788-1536 or email@example.com.