The interest rate on a 30-year fixed rate loan fell to 3.99 percent last week, a milestone not seen in more than a year. Whatâ€™s more, this rate marks significant dips from those of the past several decades. In fact, itâ€™s 1.75 percent lower than November 2004, 5.18 percent lower than November 1994, and 9.65 percent lower than November 1984.
In short, itâ€™s a good time to be shopping for a mortgage. And itâ€™s an even better time to be refinancing one.
Don Frommeyer, CEO of NAMB â€“ The Association of Mortgage Professionals, believes refinancing at todayâ€™s record lows is a great move, especially for homeowners who fall into one of the following categories:
- You havenâ€™t refinanced before. Itâ€™s best if you only refinance once over the life of your mortgage loan. Refinancing comes with lofty closing costs, which incurred multiple times could offset any savings from refinancing.
- You have an adjustable rate mortgage. Itâ€™s hard to imagine rates will fall much lower, so if youâ€™re in an adjustable rate mortgage (ARM), chances are your interest will rise over the next several years. Itâ€™s a good idea to lock in your rate now.
- You donâ€™t plan on moving any time soon. As with any investment, you have to consider your long term goals. If you think you may outgrow and sell your current home in a few years, it might not be worth the trouble of refinancing.
- Your credit is in good shape. Your ability to manage your credit cards and pay down your debt signals to lenders that youâ€™re trustworthy. And, you can make up ground in as few as four weeks prior to refinancing.
- You want to consolidate multiple loans. If you have both a mortgage and a home equity line of credit, you may want to wrap those loans into one payment with a lower interest rate. In this case, refinancing into one fixed rate loan makes sense.
According to Frommeyer, refinancing isnâ€™t for everyone and, although because rates are low, homeowners should do their due diligence and lay out their long-term goals before making any decisions.
For more information, visit www.namb.org.