Refinance Now or Later

?Just because mortgage rates have been a record lows recently it doesn’t necessarily mean you should refinance your mortgage right now according to some economists. Many consumers are feeling that mortgage interest rates are basically at the lowest point they could possibly reach right now, as lenders have seen more interest among borrowers looking to take advantage of the historically low mortgage rates. Currently, the average rate for 30-year-fixed-rate mortgages has fallen to just under 4% and rates on 15-year loans have fallen to nearly 3.25%. The great rates only apply to borrowers with excellent credit though, and they do vary by region as well.

The rates may seem low now, but lawmakers and bankers may succeed in pushing them down even further in the near future as administration officials try to move the rates even lower. The Federal Reserve is buying more mortgage-backed securities and the White House is looking for ways to prop up the Home Affordable Refinance Program in order to help borrowers refinance even if they have little or no equity left in their homes. The thinking is that if the rates fall low enough that more people begin refinancing, it could help stimulate the overall economy. The economists warn that although the rates could fall in the short term, the will eventually start to rise again as the economy begins to get stronger.

This means that with rates still hovering around 4%, and after you add in the typical cost of about 2% for the typical refinanced loan, refinancing today might not be in your best interests. People who try to refinance every time the rates fall a bit will also find they might be losing money in the long run due to the stacking of closing costs every time they get a new loan. Making decisions based entirely on lower rates without taking into account the closing costs, tax rates and the number of years left on a mortgage, could be a mistake.

Waiting for a lower rate that may never materialize can be risky, but if borrowers can get their lenders to waive some of the other loan fees, it might only take a half-point of savings to make a deal truly worthwhile. If homeowners can get their lenders to cover their closing costs, the loans would be more affordable with less upfront costs. Some borrowers have approached the problem by refinancing with a shorter 20 or 15 year term that allows them to keeps their monthly payments about the same as they were paying on a 30-year loan.