IT'S TIME TO REFINANCE!
For homeowners who have been waiting for interest rates to fall even further before refinancing, it might be time to pull the trigger on a deal. Rates are moving up—and could stay higher for a while, experts say.
The average rate for a 30-year fixed-rate mortgage climbed to 4.08% for the week of March 22, up from the record low of 3.87% it hit in February, according to Freddie Mac. Rates on 15-year loans were up to 3.30% last week from the record low of 3.13% reached earlier in March.
While rates still are below where they were a year ago, some economists say they are likely to keep rising throughout 2012 and into 2013. That means your window of opportunity to lock in a rock-bottom rate might be closing soon.
"If you're considering refinancing, there's really no point in waiting," says Frank Nothaft, the chief economist at Freddie Mac.
Freddie Mac, Fannie Mae and the Mortgage Bankers Association all are projecting that rates will keep ticking higher this year and beyond. Freddie Mac and the Mortgage Bankers Association predict the average rate on a 30-year fixed-rate mortgage will reach 5% next year.
If you wait until the end of the year to refinance, and the average 30-year rate goes up to 4.7%—as Freddie Mac projects—you will be paying $1,877 more per year on a $400,000 mortgage than if you refinanced at last week's average rate.
An adjustable-rate mortgage might be a good choice if you plan to move soon, since it allows you to lock in an even-lower rate for a fixed period, typically five years, and presumably sell your home before it goes up.
When you refinance, you start a new term. So if you have 25 years left on your 30-year mortgage and you opt to refinance with a 15-year loan, you will pay off your mortgage more quickly, though the monthly payments might be higher. If you refinance into a 30-year loan, it will take you longer to pay off your mortgage, though your monthly payment will be lower.
Refinance deals vary depending on your financial situation and location, but borrowers with excellent credit scores typically qualify for rates below the national average. So, don't sit on the fence long and miss out on the great low rates while they are existing.
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