For years, millions of Americans have been prevented from undertaking a mortgage refinance because their home loans were "under water," "upside down" and in "negative equity." Those three terms all mean the same thing: the value of the home on which a loan is secured is lower than the amount owed on that loan.
However, as house prices rapidly rise, that situation is changing quickly. On May 6, Lender Processing Services published its March Mortgage Monitor report, which revealed that the number of under-water loans plummeted by 41 percent during the 12 months ending March 2013. That means that literally millions of homeowners can now, for the first time in years, once again seek out the best home refinance deals.
And, if current house-price trends continue, millions more should soon be following them. On May 7, CoreLogic, a company that tracks and analyzes the residential property market, announced the latest figures for its monthly Home Price Index. In March 2013, average prices nationwide were a whopping 10.5 percent higher than they were at the same point in 2012. That was the 13th consecutive monthly rise, and the highest year-over-year increase since March 2006.
Of course, it has been possible for some time for certain borrowers with negative equity to refinance using the government's Home Affordable Refinance Program (HARP). And the Federal Housing Finance Agency announced in April its intention to extend that program beyond its planned expiration at the end of this year until December. 31, 2015. However, many may find that they can get better deals when their home loans stop being under water.
If your home has only recently broken out of negative equity, you have probably endured years of frustration as your neighbors, friends and relations have cashed in on much lower mortgage rates. If only you could have accessed the same lower monthly mortgage payments, your household budget would have been transformed. But it might be that you could still have the last laugh, because current mortgage rates are still extraordinarily low. Indeed, you could end up with a lower rate than those in your circle who refinanced earlier.
According to HSH.com's Mortgage Rates Radar, as of May 14, the average rate for a 30-year fixed-rate mortgage was 3.61 percent with an average 0.8 point. That is just a bit higher than the all-time record low of 3.31 percent set in November 2012.
Meanwhile, the week of May 2 saw the average rate for 15-year FRMs actually reach a new all-time low: 2.56 percent with an average 0.7 point.
Whether you've until recently been prevented from refinancing by an under-water home loan, or whether you have simply not gotten around to taking the plunge, these rates -- together with the general positivity in the housing market and wider economy -- should be a real spur to action. Perhaps the first thing you should do is use a mortgage calculator to explore the amount you could potentially save, and then get mortgage refinance quotes to begin the process.