For the past few years, we have experienced a tumultuous housing market. One bright spot, however, is a decline in mortgage interest rates. Even if you are not in the market for a new home, you can still take advantage of low rates by refinancing your current loan.
With rates hovering in the "low 4's", if your bank or mortgage lender hasn't called you to tell you to check into refinancing, you may want to give them a call. Swapping your old mortgage for a new one can result in big savings, totaling thousands of dollars over the life of the loan. Refinancing makes sense if you:
Have an adjustable rate loan. Lock in a traditional 30-year fixed-rate mortgage now. Rates on adjustable mortgages aren't much lower than fixed, so it's probably not worth the risk of rates moving up eventually. The benefit here is really the certainty that your payment will never change. Even if you're trading away an adjustable rate at 3.5% for a fixed-rate at 4.5%, it may make sense to refinance.
Want to swap a 30-year loan for a 15-year mortgage. Maybe you're seven years into a 30-year loan and hate the idea of extending the loan another three decades. Refi into a 15-year mortgage. Swapping a 30-year for a 15-year mortgage will get you a slightly lower rate and you'll pay less interest in the long run. But, the downside is a higher monthly payment.
Are moving from a jumbo loan to "conforming" size. You'll have a tough time refinancing a jumbo loan. But if you've paid off enough of your existing loan, so that the balance is reduced enough to fall under the "conforming loan limit" ($417,000 in most areas), you may be in luck. Find the loan limit for your area on the Federal Housing Finance Agency website (fhfa.gov).
Can shave 1/2 to 3/4 of a point off your current fixed rate. If you can shave that much from your current fixed rate, it may make sense to refinance now as long as you can recoup closing costs. To figure out how long it will take to recoup costs for monthly savings, use calculators at Bankrate.com or Dinkytown.net.
Record low interest rates will not last indefinitely. If you think it may be time to buy a home, contact a good local realtor. If not, check with your lender to see how a refi could put money into your pocket.
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