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National Mortgage Rates 21 May 2012
| Loan Type | Today | +/- | Last Week |
|---|---|---|---|
| 15 yr fixed | 3.00 | - | N/A |
| 30 yr fixed | 3.69 | - | N/A |
| 5/1 ARM | 2.69 | - | N/A |
Rates may contain points
Don’t Miss The Mortgage Refinance Boat!
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- JR Hevron - MortgageLoan.com
If the economy has kept you from refinancing, consider doing it now before you miss the boat.
This past year, you’ve probably heard a lot of talk about mortgage refinancing. Historically low rates have helped many homeowners to refinance and get on top of their finances with lower monthly payments and better terms.
Maybe you haven’t explored refinance because the economy has kept you in a financial holding pattern. Perhaps you didn’t feel that it was smart to spend savings on closing costs. Whatever the reason, the time to act is now.
The economy is starting to pick up (if slowly) and theses low rates really aren’t going to last forever. According to Housing Wire, “expected rises in mortgage interest rates do not bode well for future refinancings.”
Here are a few questions to ask yourself if you are finally considering a refinance:
Why refinance?
Though it may seem that the only reason to refinance is to take advantage of lower monthly payments, there are other reasons:
Changing your loan program type: Originally, you may have chosen an adjustable rate mortgage to take advantage of super low rates. Once the rates increased, though, that mortgage may not have seemed like such a great deal. By refinancing, you can obtain a loan with a fixed rate mortgage and reintroduce some predictability to your finances.
Changing the duration of you loan: It sounds crazy, but if you can afford it, you may want to consider increasing your monthly loan payments by changing your loan from a 30 year to a 15 or 20 year. You’ll end up paying more per month, but your finance costs over the duration of the loan will plummet—and you’ll still be taking advantage of the lower rates.
Is a refinance worth it?
Before going through the process of refinancing, you have to get dirty with a little bit of math and figure out if it’s worth it for you. The most basic calculation is to figure out your breakeven period. This is basically how long it will take to “break even” considering the monthly savings vs. the closing costs of the refinance (which can be thousands of dollars).
To figure out your breakeven period, divide your closing costs by the amount that you are saving each month. If you are saving $200 a month, but the closing costs add up to $5,000, then the breakeven period is 25 months. Are you planning on still being in your house two years from now? If not, then the extra paperwork and hassle might not be worth it. If you plan to be in your house for at least eight years, then the total savings is $14,200. Not bad.
For a more exact figure, work with online refinance calculators that can take into account things like your income tax rate.
You may also want to consider factors like whether or not you’ve broken even from your original mortgage. If you paid $3000 two years ago on percentage points at the closing to lower your first mortgage $100 per month, you may not have reached the breakeven point and will need to factor in that loss. It’s not a deal killer, but something to take into consideration.
Can I deal with this not being a quick process?
Many hopeful homeowners go into a refinance thinking that everything will be settled after a few phone calls. Sadly, this is not usually the case. “Processing times are longer today for a number of reasons, including regulatory changes and historically low rates,” writes Jennifer Saranow Schultz, in her Bucks column for the New York Times. She adds, “it’s safe to assume that a refinancing will take four months from start to finish and to plan accordingly.” What this means for anyone, besides a lot of headaches, is that you should get the bank to state in writing that they will extend your lock rate past the standard 60-90 days.
Do I have any alternative to refinancing?
If you ultimately decide that a refinance isn’t for you, consider taking the money that you would have spent on closing costs and putting it towards the principle of your loan. That way, you’ll at least be paying off your mortgage more quickly, and ultimately lowering your finance charges.
Hopefully these four questions have helped you to start thinking about whether or not a refinance is worth it for you. If it is something that you are interested in, call your lender today. Otherwise, you’ll be kicking yourself in a few months or a year when these low rates are just a happy memory.
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National Rates
| Loan Type | Today | +/- |
|---|---|---|
| 30 yr fixed | 3.69 |
|
| 15 yr fixed | 3.00 |
|
| 5/1 ARM | 2.69 |
|
Rates may contain points
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