Thursday,June24,1993 - THE CHARLOTTE POST - PageSC
One Third Of American HomedWners Say
They Have Refinanced Their Mortgages
WASHINGTON, DC — Newly available results
from a national survey of attitudes toward
housing and homeownershlp conducted for
Fannie Mae, the nation's largest source of
home mortgage funds, shows that 31 percent
of current homeowners have refinanced their
mortgages, with nearly one In five (19%) having
done so In the big refinancing waves of 1992
and 1993. According to the survey, 14 percent
of homeovmers are currently considering refi
nancing their mortgages.
Reasons to Refinance
According to the 1993 Fannie Mae National
Housing Survey of more than 2,000
Americans, when asked what would be the
most Important refinancing goal — lowering
payments or reducing loan terms, homeowners
were evenly split between the two. Forty-six
percent (46%) said reducing the length of their
mortgage would count most, while 40 percent
indicated lower monthly payments be the most
Important.
However, the survey, conducted for Fannie
Mae by the survey research firms of Peter D.
Hart and Robert Teeter, reported that among
those homeowners who had actually refi
nanced, more cited lowering monthly payments
as most Important, while those who had not
refinanced preferred reducing the loan term.
This suggests that while reducing the loan
term may be the Ideal, lowering monthly pay
ments is the reality.
Where Savings Would Go
Forty-five percent (45%) of homeowners said
that they would save money made available
from lower monthly mortgage payments as a
result of refinancing; 35 percent said they
would use such money to pay off bills: and 10
percent said they would spend whatever addi
tional funds became available.
Fannie Mae Chairman and Chief Elxecutlve
Officer James A. Johnson, speaking in Idaho at
a leadership meeting of the Mortgage Bankers
Association of America, said, "Quite remark
ably, almost a fifth of American homeowners
have refinanced their mortgages In the past
year-and- a-half in response to the lowest
Interest rates In a generation - and a large
number of homeowners believe they could stUl
benefit from refinancing."
Considered extremely or very important fac
tors when refinancing:
• taking five to ten years off their mortgage
term 70 percent
• no points or upfront closing costs 68 per
cent
• paying an Interest rate two points below
their current rate 61 percent
However, reducing one’s Interest rate by less
Should You Buy or
Rent a Home?
By The North Carofina Association Of
Certified Public Accountants
Lower prices for houses and modest mort
gage interest rates provide a dual incentive for
the would-be homeowner to enter the real
estate marketplace. However, it Is recommend
ed that you take the time to explore other
housing alternatives and to consider how such
a purchase will affect your personal financial
plan and lifestyle goals.
major repairs. Nor do you always have to play
the role of handyman. You can usually call
someone else when the roof leaks or the bath
room has plumbing problems.
Despite these advantages, renting has not
Investment value or tax benefit. No matter how
much rent you pay, you never build equity In
the property — and you can never experience
the security that homeownershlp often brings.
Opting To Rent
For some people, no matter how low interest
rates fall, renting still makes the most sense.
Choosing to rent frees you from worries about
property values declining and from incurring
the costs associated with buying or selUng a
home. Instead of tying up your money in the
down pajmient for a house, you can place It In
other Investment vehicles that might offer you
greater liquidity or a higher return. What's
more, because you can simply move when your
lease expires, renting also gives you Increased
flexibility. Additionally, renters have the luxury
of not bearing the entire financial burden of
home repairs. If you rent a house, you may be
responsible for small repairs, but you should
n't have to Invest a large sum of money in
The Advantages of Homeownershlp
The tax benefits begin even before you move
Into your personal residence. You can take a
tax deduction for the points paid to secure a
mortgage on the purchase of your house. Once
you move in, you can deduct property taxes
and Interest paid on your mortgage. Such
deductions help to minimize the financial bur
den of homeownershlp. If you put a lot of
money Into your home to make Improvements,
such as adding a bedroom or bathroom or
refacing the front of your home, you get anoth
er tax break. These capital Improvement costs
are added to the basis of your home and help
to offset the gains you may realize when you
sell It.
When you sell your home, you not only have
the opportunity to make a profit, you can also
shelter that profit from taxes. To defer the cap
ital gains tax, you must sell your principal res
idence and- buy and use a new one of equal or
greater value at least two years before or after
the date of the sale. Remember, to defer taxes
— one point lower -- when refinancing was con
sidered not Important at all by 41 percent of
homeowners, and 21 percent believed that refi
nancing offered with minimal paperwork also
was not an Important factor in deciding to refi
nance.
Of all homeowners, 37 percent said they had
seriously considered refinancing, while 60 per
cent reported they never had done so.
Reasons Given Not to Refinance
Among homeowners not currently consider
ing refinancing, 21 percent reported that "it
would not pay to refinance," and 14 percent
said their mortgage was almost paid off.
Twenty percent (20%) said they "never gave it
any thought one way or another."
Where Homeowners Would Go to Refinance
Homeowners, if they decided to refinance,
would certainly or probably:
• use their current mortgage lender 47 per
cent
• choose another mortgage lender 30 per
cent
• not sure 23 percent
Mortgage rates homeowners pay
A full third (33%) of homeowners said they
are paying mortgage rates of 9 percent or
more, one and a half percentage points higher
than the current Interest rate for a 30-year,
fixed -rate mortgage of approximately 7.5 per
cent, The mean mortgage rate reported by
homeowners was 8.60 percent.
on your gain, the adjusted sales price of your
old residence must be fully reinvested into the
cost of your new residence.
If you are at least 55 years old, homeowner-
ship may open the door to an even bigger tax
break when it comes time to sell your home:
You are entitled to a one-time exclusion of up
to $125,000 of gain ($62,500, If married filing
separately) realized on the sale of your principal
residence. To quallly for this exclusion, you
must have owned and used the house as your
principal residence for a total of three of the
previous five years before the sale. However, If
you and your spouse jointly own your home
and your spouse has previously taken this elec
tion, you may not use It.
Finally, homeowners have access to more col
lateral than renters. Whether you are seeking to
buy a car or pay down credit card charges, you
have the option of borrowing against the equity
you have In your home. What’s more, you can
take a tax deduction for the Interest on home
equity Indebtedness of up to $100,000.
Disadvantages of Homeownershlp
There's little question that bu3dng and owning
a home requires substantial financial
resources. You not only need a sizable down
payment — usually 20 percent of the purchase
price — you must also set aside money for clos
ing costs, such as bank fees, appraisals, sur
veys and termite Inspections.
See "Buy Or Rent" page 8