Last year we saw a steady reduction in mortgage interest rates and many people within the lending industry believe that interest rates will begin to rise in the early part of 2011. The anticipation of a rise in interest rates has some borrowers who refinanced in the beginning of the year wondering if re-refinancing at a lower rate would be financially practical.
According to Freddie Mac’s weekly survey on conforming mortgage rates, interest rates leveled out in the last quarter of the last year, but The Mortgage Bankers Association reported that the current economy seems poised to see an increase in mortgage interest rates within the 1st quarter of 2011. There may be a limited time before borrowers see current interest rates rise again to ones that closely resemble the one that they are now locked into.
Here is an example of how much a borrower can save if they were able to refinance a $200,000 loan and lower their interest rate from 5% to 4.25%. The monthly savings would be approximately $100.00 per month less than their current payment. It would take approximately 31/2 years to recoup the costs associated with the refinance. So if they are planning to stay in the home for longer than that period then maybe re-refinancing would be something to look into.
Many homeowners who have refinanced or purchased within the last year may find themselves to be cash strapped from the last loans closing costs. For these types of borrowers there is always the possibility of securing a “zero cost” mortgage. If the borrower’s credit is good enough to obtain this type of loan then there is no need to accumulate another large amount of cash for the closing. All of the costs associated with the refinance are rolled into the new loan in the form of a larger total loan balance or the costs are settled with a slightly higher interest rate.
It is always recommended that before any borrower makes the final decision to refinance their home they should seek the advice of a certified financial planner or other financial professionals. Remember that the best advice comes from someone that does not stand to profit from the advice that they give you. Asking a real estate agent or mortgage broker if you should refinance your home is like asking a used car salesman if you should buy a car.