Refinancing Your Home Loan - Is Now the Right Time? by RJ Baxter First Mortgage Corp Evergreen Colorado

Refinancing Your Home Loan - Is Now the Right Time?  by RJ Baxter First Mortgage Corp Evergreen Colorado

Mortgage rates have been low for quite some time, and despite several spikes upward, they always seem to come back down.  Because of  this, every day people ask me if it's the right time for Refinancing Your Home Loan.  Should you wait for rates to get lower, or jump in and get it done at the historically low rates we have been seeing lately?

There are many signs that rates will be going up in the near future.  Refinancing Your Home Loan now, in my opinion, is the prudent thing to do.  It's not like 5% on a 30 year fixed mortgage is a bad rate, and the possibility of rates going much lower is slim.

Here are 4 reasons why now is the time for Refinancing Your Home Loan and why rates are likely heading up this year:

Inflation:  In the era of government bailouts, money has been running off the printing presses like mad.  National debt has soared, and the money supply is being increased.  Why is this bad?  Because it leads to inflation. Inflation is not a problem yet, but it's virtually certain that in the not-too-distant future it will be.  Inflation is bad because it erodes the yields on long term debt such as the bonds that back mortgages.  Lenders have no choice but to raise rates in order to realize the gains they are looking for.  The net result- higher mortgage rates for you.

Feds Exiting Stimulus Programs:  On March 31st, the government ended a program that for over a year has been partially responsible for keeping rates down.  Now that the government's program  of buying mortgage-backed securities has ended, there will be more supply on the market.  The laws of supply and demand dictate that prices for mortgage-backed securities must fall if supply increases but demand stays steady.  Lower bond prices = higher mortgage rates.

Economy:  The economy is showing signs of life.  Why is this bad for mortgage rates?  In a good economy, businesses are doing well, and stocks show nice gains.  This means that investors start putting their money in riskier investments such as stocks, and taking it out of less risky investments such as bonds.  Again, supply and demand- if there is less demand for bonds, prices will fall, and mortgage rates correspondingly go up.

No reason to wait:  With rates at historical lows, around 5%, there is no reason to wait on Refinancing Your Home Loan.  If you wait a few months to get perhaps 1/8% lower in rate (and that may not even be possible), then you have 3 more months of payments and more interest at your current rate.  The savings you would have with the slightly lower rate would be offset by your higher payments for the months you were waiting on Refinancing Your Home Loan.  With rates at historic lows, there is no reason to pass up 5% while you can still get it.