Refinancing a mortgage could be that
golden opportunity to lock in today’s low interest rate for the next 10, 15,
20, 25 or 30 years. Today's interest rates are low.
The Fed won’t maintain the current
bond purchasing level forever, and just as rates spiked in September when the
Fed hinted the bond purchasing would change, rates will spike again and will do
so at higher rates when purchasing levels actually do change.
As interest rates remain very low,
homeowners can benefit greatly from a refinance. Several categories of people
in particular should consider refinancing.
Carrying A High Rate
Anyone with an interest rate above today’s level should think
about refinancing. That is unless they are planning
to sell within the next few years, a refinance will almost always save money in
the long run if the rate can be lowered by at least one percent.
Switching From FHA To Conventional
Given that FHA mortgages now carry mortgage insurance premiums for the life of the
loan, it makes a lot of sense for borrowers to switch away from them when they
can. Refinancing may be possible once the homeowner has built up enough equity
to qualify for a mortgage from a traditional lender, without the burden of
mortgage insurance. This most certainly will lower the payment.
ARM Coming Up On Adjustment
The low rate of an adjustable rate
mortgage sticks only for the first few years of the mortgage. After this point,
the rate adjusts each year based on market trends.
Instead of paying the adjusted rate,
which is almost always higher, homeowners can refinance into a new fixed rate
mortgage to lock in one of today’s low fixed rates for the duration of the
mortgage.
Cash Out To Consolidate Debt
Homeowners carrying high-interest
debt, like credit cards and personal loans, can often benefit from
consolidating it into their mortgage. As long as they maintain at least 20
percent equity in their home, they can get a cash-out refinance for an amount
higher than their current mortgage balance.
They can then use the difference to
pay off high-interest debt.