Last week, the average interest rate for a 30-year fixed mortgage dropped to 5.08% which is over a full point lower than 30 days ago. This resulted in a whopping 48% increase of mortgage application, 80% of which were from homeowners who are looking to lower housing costs.
With mortgage refinance loans rushing like this, make sure that you are one of those groups of people who should refinance their mortgage. You should refinance if…
You have a high adjustable-rate loans. It is better for you to get into a low fixed rate loan. Your monthly payments will not only drop but possible future rate increasefs will also be eliminated.
You want a 1% point or more lower rate. If your fixed rate is already reasonable then it is not necessary to jump into a new loan everytime the rate goes down. If your rate is 6.5%, it would be a great time to refinance.
You plan to stay in your home for a while. If you are planning to sell the home the next few years, you probably should not refinance. This is because the increased balances usually takae a year or two to be wiped out by lower monthly payments. Unless the difference in interest rates is very substantial, it is not worth jumping into a new loan now while planning to sell your home next year.
You have significant equity in your homes. If your home equity is down below 20% of the total appraised home value, you most likely have to get a private mortgage insurance which turns a 5% loan into 6-7%. This will likely erase any advantage of refinancing.
You are sure that rates will not decrease much further. Whether the rates are going to go lower or higher instead is only a prediction. Consider the advantages and disadvantages of gambling on rates before you get a refinance.
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3 Responses
Cool website
informative and educative…. u really wrote all of these posts? Wow! *hail, hail*… I’ll definitely put you in my blog reading list. Keep on writing and take care!
PS : kindly pls check my blog as well, it’s not as informative as yours though
Posted on December 25th, 2008 at 11:45 pm
Thanks for the feedback. Yes I wrote them all. Except if it’s stated that I found it somewhere and there’s a link to the original post. Cute little girl you have! I just checked out your blog.
Posted on December 26th, 2008 at 12:14 am
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Posted on January 16th, 2009 at 3:39 pm
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