A Good Time to Refinance

28 May, 2014

I never thought I’d say this, but home mortgages have become even cheaper.This summer, economists and real estate industry analysts looked at skidding Treasury yields and wondered just how much further interest rates on home loans could fall.  The answer: perhaps even further.

On November 17, interest rates on 15-year adjustable rate loans averaged just 3.31%. Rates on conventional 30-year home loans averaged 4.00%, and average rates for 5/1-year ARMs and  1-year ARMs were respectively at 2.97% and 2.98%, according to the U.S. government.  I remember being thrilled, almost 30 years ago, getting my condo refinanced at 10.75%.  That was the going rate in the early ’80s. 

Those able to refinance are seizing the moment. If you can do it, keep your long-term goals in mind.Years ago, a refi came down to one factor: if you could knock a couple of percentage points off your interest rate, you did it. Today, it’s a bit more complex. There are three aspects to consider: a) how much you can save per month, b) lender points and fees, and c) how long you intend to live in your home.

How long will rates stay this low? It is truly hard to say and recent history has illustrated that. On April 10, 2010, a New York Times headline blared: “Interest Rates Have Nowhere to Go but Up”. At that time, the average rate for a 30-year fixed mortgage was 5.31%. Look where it is now.  Interest rates will move significantly north at some point, so a window of opportunity beckons – and no one really knows how long it will stay open.

Think before you make a move. Before you get out that pen and sign anything, talk about your options for refinancing with a qualified mortgage specialist, and talk to your financial consultant to see how your choice to refinance relates to your overall financial situation.

The spouse and I are, thankfully, within spitting distance of having our home paid off.  That will be a big day…maybe worth a party.  But if we had more time left, we’d seriously consider refinancing.  If you choose this option, I hope it goes without a hitch.  Until next time, here’s to good planning!

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