The Federal Reserve's cut in Key interest rates makes 30 year fixed mortgage rates the lowest since the 1960's, sparking a surge in homeowners looking to cash in and refinance. Some lenders are now offering rates as low as 4.5 %. Last March, I refinanced my own home at 5.5% and was thrilled with that rate. Does it make sense to seek out a refi? It could depending on what your current rate is, how long you plan to be in your home etc. One rule of thumb that I hear a lot is that if the difference in your current rate and the new rate is at least 1.5% you should consider it. You need to determine how much the refinance is going to cost you in real costs and how long it will take to realize any savings. In other words, if it cost you $1500 to refinance and you are going to save $100 per month, it will be 15 months before you realize any true savings.
Another good reason to refinance is if you are in an adjustable rate mortgage (arm) that is getting ready to reset, already has or in general has simply become too expensive. Lenders are stricter with credit, requiring higher credit scores and borrowers equity position of at least 20%.
All of this leads one to believe there is a strong possibility of a big refinance boom. If you're trying to sell and haven't been able to this could really help you out. With lower interest rates there are more able borrowers out there to buy your home. The other possibility is that if you have enough equity in your home, you can pull some out to make improvements. In any event, the loosening of the credit hopefully will help stimulate the housing market followed by the rest of the economy.
2 comments:
I was just reading about this in the paper this morning. Aside from refinancing wouldn't this be a great time to buy? There's got to be some good bargains out there and now mortgage rates are at the lowest they've been in 37 years. I think I'm going to visit where you are and check things out.
Hi Chesnut, you are certainly right about there being good buys out there. One of our agents just found a house in foreclosure and they are in contract with a mid January close. The main point is that her buyer is able to buy a great house at well below market value. I too just made a real estate purchase because the opportunity was just too good to pass up. How's the weather in Cleveland? I have my windows open in the office it's such a nice day here. Golf is definitely in my weekend plans.
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