Refinancings Push Mortgage Applications Higher

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By Diana Olick | @diana_olick

Mortgage rates didn't move at all last week, but more borrowers made applications to refinance their home loans.

A weekly measure of loan volume by the Mortgage Bankers Association showed a 2.4 percent gain in total applications week-to-week, with a 4 percent jump in refinances leading the charge.

Refinancing has been languishing for more than a year, after rates jumped a full percentage point in the spring of 2013. Refinance application volume is still down over 40 percent from a year ago, despite slightly lower rates currently.

Loan applications to purchase a home are still languishing, up just 0.3 percent week-to-week, on a seasonally adjusted basis, according to the MBA. They are down 15 percent from a year ago. This as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) remained unchanged at 4.33 percent. The refinance share of mortgage activity increased to 54.4 percent of total applications, the highest level since March 2014.

The mortgage numbers seem to run counter to the latest readings from the housing market. Sales of existing homes rose 2.6 percent in June from May, according to a report released Tuesday by the National Association of Realtors. Sales of newly built homes have also seen gains. The June reading from the home builders is set to be released Thursday morning.

The answer to this disconnect between sales and mortgage volume likely lies in the still high percentage of home buyers using all-cash in transactions. One third of June buyers closed their deals with cash, which the Realtors' chief economist Lawrence Yun deemed, "amazing" in a press conference Tuesday. Others say this simply proves the disconnect in the market today between the "haves" and the "have-nots."

"There is the regular market where people need to make money in a job and get a mortgage," said Nela Richardson, chief economist at Redfin, a real estate brokerage. These, she says, aren't the ones driving the market.

June home sales rose most at the highest end of the market, in homes priced above $750,000. Sales of homes priced below $100,000 fell by nearly 9 percent from a year ago.

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The 7 Biggest Financial Mistakes 40-Somethings Make
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Refinancings Push Mortgage Applications Higher
If you've been making mortgage payments for a while now, it may have become just another task you do automatically each month. But it's time to start thinking about your end game. When will your house officially be paid in full, and how will that date intersect with your other plans? Do you need to adjust anything to make your "mortgage freedom" date align with the rest of your life? For example: Do you want to have your house paid off by the time your kids leave for college? If so, start scrutinizing the timing, so you can figure out if you need to make extra payments.
The average student graduating in 2014 emerged with $29,000 in student loan debt. There's no predicting what that number will be once your children are ready to don a cap and gown. But you don't want your kids to be saddled with tens of thousands in debt as they begin their adult lives (or potentially live in your basement well into their 30s because of that debt).

While your children should absolutely apply for every scholarship they can, you can't count on them getting what they'll need. So. there's no time like the present to start seriously building up their college funds. If you're not quite sure about the best ways for you to do that (529 plans are great, but they're not the only good choise), a fee-only financial adviser can walk you through your options.
Are you putting aside enough for retirement? Aim to replace 70 percent to 85 percent of your current income, or save 25 times your current annual expenses. Once you have that final number in mind, use an online retirement calculator or sit down with a financial adviser to come up with a plan for how much you'll need to save each year to reach it. If you haven't already done this, don't delay another day. Future You will thank you.
Credit card debt is a shackle that can prevent you from reaching every other monetary goal on your list. One of the first things you need to do to get your financial house in order is to eliminate all consumer debt -- the sooner, the better. Otherwise, you're losing money each month that could be put to better use elsewhere.

Make debt payoff a top priority. Try an aggressive method like the "debt snowball," where you throw every extra dime you can at your smallest balance until you've decimated that bill. Then move to the next one on the list and continue amassing "victories" until you're done with every debt. Where can you find the money to accelerate your debt payoff? Reduce your  expenses or take a temporary second job, if necessary. The sooner you free yourself from debt, the better.
Your current vehicle won't last forever, no matter how diligent you are at taking care of it. When it comes time to buy a new car, will you have saved enough to make the purchase in cash? As you get older, you should be systematically reducing the number of financial obligations you're saddled with -- not adding on new ones. Car loans take from three to seven years to pay off. (The current average length is around 5½ years.) Even if your current car lasts you well into your 50s, financing a new one could mean that you'll be facing loan payments into your retirement years. Instead, plan ahead so you can pay cash.
If you're married, have children or support your parents financially, you should have term life insurance. Tragedies can happen at any time, and term insurance can help you create a Plan B for the benefit of those who rely on you. If you're healthy, you can get term life insurance coverage with a $500,000 benefit for roughly $29 a month. That's a small price to pay to know your family will be cared for if anything happens to you. The longer you wait to get that coverage, the higher your price will be.
Just like life insurance, disability insurance is a wise investment. (And, just like life insurance, the longer you wait to get it, the higher your monthly payments will be.) Should you fall ill or get injured and be unable to work for a period of time, disability insurance can pay out 50 percent to 70 percent of your income. Hopefully, you'll never need to use it -- but you never want to be in a spot where you do need it and you don't have it.
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