Well we are on a roller coaster and the week ahead looks like another potentially volatile week in economic announcements which may mean for a very volatile week for interest rates. Last week we saw a time period measured in hours where the 30 year fixed rate had dropped to as low as 5.375%. Sound good ? More than likely the answer to your question is yeah thats a great rate but is refinancing right for you? This week I can't explain how many times I have been asked that question so I thought I would write down from my point of view when is it right? or when do I not do it.
My first question when someone asks should I refi? is not what are you currently paying it is when do you plan to sell your home, if the answer to that question is within the next 3 years then I would more than likely discourage you from refinancing, but it really isn't as simple as just the one question, you have to dig to make sure that refinancing your home is right for you and a good loan officer/financial planner will be able to compute your exact savings and how this fits into your financial plan. If your in the house for the long term you might consider taking advantage of the low interest rates not by cutting your payment but by cutting the term of your mortgage down from 30 to 25 years? from 25 to 20 or even 15 and in some cases, I have seen clients cut it from 15 to 10 years. With the 30 year fixed being in the 5's these lower terms some of them have seen the upper 4% range. Being able to build that equity faster in a shorter time period I know may raise your payment but be sure you compare where you will be staying on course or raising your payment slightly to put you in a better equity position when you do decide to sell your home.
I think sometimes we focus on obtaining that lowest payment possible without realizing we are stretching out the maturity date of that loan, the key would be to make your mortgage fit your financial plan if your selling your house in 7 to 10 years what product is going to build the equity for you the fastest. There are times that even when your selling your home in the near future restructuring your debt / and or mortgage at a low interest rate could be a wise thing to do - Its a simple calculation to determine the cost of the refi compared with how much savings its bringing you, but the other thing is if you think the sale could take some time and refinancing helps you prepare for having it on the market for a longer period then go for it. I have assisted clients in both situations where they knew it was a short term thing and then others where they were in the house that they would be in for the rest of their lives. When these rates are hitting the lows they have been hitting its a good idea to review exactly where you are.
If your even thinking about refinancing but the rate(s) are not where you want them to be quite yet my advise would be to plan with your mortgage professional providing them with all the information they need so if we do have another rate dip in the near future they are ready to pull the trigger and lock it in.
Darren Stewart
OakStar Bank
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