LIMA — With mortgage rates plummenting during the past few years, some Lima banks have noticed an influx of residents wanting to refinance their house for a lower monthly payment.
“It has picked up again recently because the rates have dropped yet again and its really probably a couple of things,” said Curtis Shepherd, senior vice president of retail banking for Union Bank. “Some people are really looking to lower their monthly payment because of the lower rates and others are looking to decrease their term.”
And Union Bank wasn’t the only bank to express the sentiment of people headed to the banks to refinance recently.
“People who just financed even last year are coming back again because the rates are so low,” said Tami Trenkamp, Lima region sales manager for the State Bank and Trust Co. on Market Street. “People are jumping at the opportunity to do it and even to take their 30-year mortgage to a 15-year.”
On Friday, the home loan rates for a 30-year mortgage were right around 3 percent and for a 15-year mortgage, they dropped to about 2.5 percent in Lima.
Those rates are much lower than 10 years ago when the rates were up around 6 percent or 7 percent, Trenkamp said.
“We did see a trend in the early 2000s when people were going from 15 back to 30,” she said. “And the reason being was because the values dropped and everything got more expensive and people needed the cash.”
Kurt Neeper, marketing director at Superior Federal Credit Union, said the refinancing craze has never really slowed down since 2009 for them.
“We’re still at the level we’ve been at since 2009,” Neeper said. “The refinance craze has never really slowed down after that.”
Trenkamp said during the last three years and even more in the last six months, people have been eager to refinance.
“Over the last three years, we’ve seen a refinance trend going on I would say for the whole year,” she said. “And in the last six months, it’s been the same. There are people waiting in line at this point.”
And not only are more people wanting to refinance, but as Shepherd mentioned, more are wanting to switch from a 30-year mortgage to a 15-year mortgage to go for the lower rate.
Neeper said Superior always recommends the 15-year mortgage over the 30-year obviously because of the lower rates and the shorter time span.
Trenkamp said even with the costs of refinancing, those who have equity built up in their homes are still refinancing frequently because the rates keep declining.
“You do see some people who basically decide the costs won’t outweigh the long-term benefit, but anyone who has any equity built up in their home, we’re still seeing them come in,” she said. “Generally it takes about 20 to 22 months to recoup any kind of refinancing costs so even though we’ve seen people do this within the same year, they do the math using their financial calculators and they see over time that they’ll recoup fairly quickly just with the monthly savings.”
Shepherd said the only reason some hesitate is because they don’t want the rates to go even lower after they recently refinanced.
“We always see people that are a little hesitant because they wonder if it will go down more,” he said. “We always ask people, ‘Are you going to be disappointed if the rates decline even lower in the next few months?’”
Neeper said Superior does about 25 percent to 30 percent of all of Allen County’s refinancing and the bank has been keeping a track record of how much they’ve saved residents.
“Just last year, we refinanced over $130 million in mortgages. The result by our estimates is interest savings of over $12.7 million over the life of the loan. That’s our estimate,” he said. “That’s $12.7 million that people can use for college education, save for retirement or spend in the economy. It does make a difference.”
On Friday in the Lima area, the lowest interest rates came from Union Bank with a 30-year-mortgage at 2.88 percent and a 15-year-mortgage at 2.25 percent.