June 17th, 2019 9:08 AM by Jackie A. Graves
Interest rates for
mortgages are low __ really low.
As of the first week of June, long-term mortgage rates were down
for the sixth consecutive week. The 30-year fixed rate average was below 4
percent, its lowest point since September 2017. If you're a homeowner, you may
be wondering if now's the time to refinance.
Here's what to consider:
It's important to know
why you want to refinance.
Some people simply want to take advantage of lower rates so they
pay less over the course of their loan or to pay it off faster. Others want to
lower their monthly payment. Some desire a better product, such as getting out
of an adjustable rate mortgage into a fixed loan. Others may have seen their
financial situation improve since they bought their home and now qualify for
better terms. And some may want to cash out some equity from their homes.
Before you agree to refinance, make sure it meets that goal.
Yes, rates are low but they were very low in the years following
the recession too.
So some homeowners may have already refinanced once already. If
you are considering another round, remember that unless you move into a
shorter-term loan, you are essentially starting the clock anew on paying off
your home, warns Sarah Mikhitarian, a senior economist at Zillow.
However, she notes that people who bought in the past year or
two when rates started to climb may want to run the numbers on refinancing.
Another note on rates: It's tough to know where things are
headed so you may want to act quickly if it makes sense for you.
"These rates and this moment are fleeting and unpredictable,"
said Rick Bechtel, head of US Residential Lending at TD Bank.
Bechtel said that lenders are busy with both an uptick in
refinancing and completing loans for the spring home-buying season, so make
sure your lock-in period allows enough time to complete the process, around 45
to 60 days.
Refinancing comes with some expenses, typically between $2,000
and $3,000 in various closing costs. You can pay those out of pocket or have
them rolled into the balance of the new loan. Some banks may waive the cost of
the fees in exchange for a slightly higher rate on the loan itself. You may
face added costs for certain state taxes that might not be factored into all
mortgage calculators either, Bechtel noted.
It's up to you how to pay for it but consider your break-even
costs. This is basically how long it would take for the savings from the
refinance to pay for the cost to refinance itself. For example, if you paid
$2,000 to refinance but saved $200 a month, it would take you 10 months to
If you aren't going to be in the house longer than that, it
doesn't make sense.
"Ultimately it's a very personal finance decision,"
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