Wednesday, February 20, 2008

Don't refinance for the wrong reasons

The economy is going through a rough patch, and the stock market is well below its all-time high. Mortgage rates have been dropping since the end of last year.

For homeowners, that can mean only one thing: It's time to think about refinancing your mortgage.

"If you can save on the interest you're paying, then it's time to do a mortgage refinance," explains Fred Glick, managing member of US Loans Mortgage LLC, a Philadelphia-based mortgage broker.

For some homeowners whose adjustable-rate mortgage (ARM) interest rates are rising, the low interest rates on 30- and 15-year fixed-rate mortgages offer an opportunity to refinance into something that's a known quantity.

"If you have a mortgage that's going to adjust, it's important to get into a fixed-rate program now," says Emma Butler, a certified mortgage planner with Mobium Mortgage Group, in Chicago.

In Freddie Mac's latest survey of mortgage rates, a 30-year fixed-rate mortgage averaged 5.72 percent with fees totaling 0.4 percent. A 15-year fixed-rate mortgage cost an average of 5.25 percent, plus 0.4 percent in fees.

A year ago, a 30-year mortgage cost an average of 6.3 percent, up more than a half percent, while the average 15-year mortgage cost 6.03 percent, nearly a full percentage point higher than what is available today.

Should you do a mortgage refinance now? Or, wait to see if interest rates drop further?

Read more of the Ilyce R. Glink article at Inman News

1 comment:

edward balcsik said...

Waiting for interest to drop further is a little risky and offers little real upside. Predicting interest rates is inherently difficult. Current inflationary pressure could pust the FED to increase rates.

So if it makes economic sense to refinance now, do it. Lock in the current rate. If rates go up, it was the smart move. If rates drop again you can refinance again. There is some cost to this, but it is small compared to the risk of trying to predict interest rate changes.