Last week the rates dropped to yet another low. If analysts are correct, we should see mortgage rates below 6% for the next few weeks and possibly a few months.
These same analysts emphasize the rate will also rise. Typically when this happens homeowners march out and refinance their mortgages, to claim a better rate.
Is a lower rate a reason to refinance?
Maybe, but maybe not. Before refinancing a borrower should consider the overall cost analysis. Refinancing a loan means closing costs. If they aren’t paid up front they will need to be rolled into the new loan. That raises the loan balance. Is this really a good thing?
Many homeowners who purchased in the past 12-24 months may have 1st and 2nd mortgages combinations with blended rates well over the mid-to-high 5% rates available now. Refinancing these WILL result in a more costs and the borrower still needs to have at least 5% equity in the home.
If a borrower is currently in an “interest only” first loan, a refinance into a fully-amortized loan, even at a rate 1% lower, will see a payment increase.
Bottom line, think, evaluate and understand what you are doing before refinancing. After all the final responsibility is up to you. Don’t screw it up!
Be smart like a fox, do what’s best for you and your family.
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One Comment
It is interesting how perspectives change so quickly. In just two months, 6% or even 5.8% seems outrageous since some FHA loans are now 4.875%. Our broker commented this week that the projection is interest rate may be back up to as high as 7% by the end of the year.
Who can say? But buyers can and should enjoy it while it lasts.
Allyson Zacharkos last blog post..FHA - Today’s Best Mortgage Deal?