Mortgage interest rates have been low for the past several months. Following the U.S. Federal Reserve’s eventual decision to taper its stimulus program, most experts expected mortgage rates to shoot up to the 5 percent level, but as it turns out, they were wrong. In fact, rates have long since gone below the 4 percent mark for 30-year fixed-rate mortgages, while refinancing activity has picked up as compared to the same time last year. Then again, recent reports have shown refinancing activity moving down a bit – does that mean you too should sit the fence on your refinance? Of course not! Actually, there are several good reasons to refinance your mortgage, and here are five of them.
Mortgage Rates Are Much Lower Now
As we said earlier, 30-year fixed-rate mortgages are much lower than they were before. In fact, they remain below the 4 percent mark on most weekly reports. By refinancing at today’s rates, you can potentially save a couple hundreds per month on your mortgage payments, and considering the cost of living in several parts of the country, those couple hundreds could mean a lot in the long run.
Lending Standards Are Less Stringent
Credit standards aren’t what they used to be in the immediate aftermath of the Great Recession – that means you likely have a better chance of qualifying for a refinance than you used to. Furthermore, government-sponsored entities Fannie Mae and Freddie Mac recently launched programs that let consumers refinance at a 97 percent loan-to-value ratio, which has really opened things up for a lot of homeowners.
You Don’t Have To Wait Too Long For Your Interest Rates To Go Down
Time was, it was most prudent to wait until the new interest rate would be two percent lower than your current rate before refinancing. But in today’s market, that’s no longer necessary – you can get a good deal on a refinance even if the new rate is “only” 50 basis points lower than your current one.
No-Cost Refinancing Is Possible
Here’s a neat trick you can try if you’re still concerned about the viability of a refinance. No-cost refinances essentially allow you to bake the closing costs and other related charges into the your interest rate or monthly payment. Try this simple example – assuming you’ve got a 30-year mortgage with the home value at $400,000 and the current mortgage rate at 4.5 percent, you can save yourself close to $120 per month on principal and interest payments and over $42,000 in total interest by refinancing into a 4 percent mortgage rate.
Chances Are You Have More Equity Now
Although, we believe that the recent surge in home prices hasn’t been a boon for would-be home buyers, existing homeowners have been better for this rise in values. Why is that the case? It’s simple – rising home values means more equity, and for those who were previously underwater or near-underwater, positive home equity, period. You won’t need to have as much cash ready to refinance, and if your LTV falls below the 80 percent mark, you can even qualify for lower interest rates.
Are you interested in homebuying or refinancing? Click here to geat a rate quote today.