Time Is Right To Refinance But Not For Everyone

Fri Jul 2, 2010, 4:55 am | 6 Comments

For the week ending June 24, the 30-year fixed-rate mortgage (FRM) averaged a record low 4.69%, down from 4.75% the week before and 5.42% a year ago, according to Freddie Mac’s weekly survey. The reason for the falling rate might be that credit is still not readily available for a variety of reasons, the biggest being unemployment rate is still quite high. No job, no money, no new mortgage.

For the survey, Freddie Mac has divided the U.S. in 5 regions. The rate in all regions is not exactly the same. It might be slightly different than the U.S. average. Check with your lender for the specific region.

If you can afford buying a home or refinancing the existing mortgage, this might be the best time to do so especially when your credit score is better.

The mortgage interest is at a record low. However, refinancing is not always the best idea. In general it is, but your case may turn to be better if you stay put and not refinance.

Conditions for refinancing

You should refinance at a lower rate than your existing mortgage. You must, however, calculate the cost of refinancing. If you plan to stay in your home for another 5 years [at least] and are able to recover the cost in 2 to 3 years, then by all means you should go ahead and refinance to lower your monthly payment.

Conditions for not refinancing

If you have just 10 years left on a 30-year mortgage and you are offered an opportunity to reduce the payments by taking out a new 30-year mortgage, you don’t win. You shouldn’t refinance then.

If you have Adjustable Rate Mortgage, think strongly about refinancing

The last few quarters, you have probably seen your monthly mortgage come down. The rate now is a record low. [That doesn't mean it will not come down further.] What comes down might go back high as well. It might be a better idea to refinance with a fixed-rate mortgage so you are secure in the belief that your rate is set for quite some time to come.

Prepaying now might be a good idea

If the balance in your savings account is high but is collecting dust in the form of 1% or 2% return at the most, you should consider prepaying the whole amount or a big chunk of your remaining mortgage. Invest in your home.

In a Nutshell
Your individual situation will dictate you what to do. Whatever you do or don’t do, it must not be because you are procrastinating and postpone refinancing further. Do your calculation and act accordingly.

Related Posts On Doable Finance dot Com

1. Tips to consider before you decide to refinance
2. Refinance Calculator
3. 30-year Mortgage Rate Falls For The Ninth Week
4. Calculators for mortgages
5. Don’t let Willie’s mortgage story be your outcome