According the Mortgage Bankers Association, which tracks housing market data, U.S. mortgage applications rose almost 50% in the past week—representing the strongest weekly increase since November 2008. This surge in refinances is probably part of a two-pronged strategy that includes taking advantage of low mortgage rates and reducing household expenses after the holiday season.
Is it time to refinance? Well it might be. If you have a high mortgage interest rate, it may be time to consider the current rates, which are at their lowest level since May 2013. The 30-year fixed rate mortgage rate was only 3.86% in December, down from 4% in November and drastically reduced from the 4.46% rate one year ago, according to mortgage statistics provided by Freddie Mac. Borrowers who refinanced their mortgages represented over two-thirds of last week’s application surge, according to MBA.
Lowered mortgage rates and consequent refinancing are an indicator of a healthier housing market, and a stronger economy in general.
Should you fulfill your New Year’s resolution and refinance? Maybe so. If you’ve got a point or more difference between your mortgage rate and the current 30-year rate, you may consider refinancing your home. When applying for refinancing, always take certain precautions: avoid pre-paid interest (points), Adjustable Rate Mortgages that “trap” refinancers (and home buyers) into mortgage payments they eventually can’t afford, interest-only loans—loans that do not pay off the principal, and financial institutions without solid lending reputations. Because most mortgage loans are sold to Fannie Mae or Freddie Mac, most lenders will be conscientious about “conforming” mortgages. But be careful, some mortgage lenders aren’t so ethical.
Here’s where mortgage-owners fall into peril; mortgage originators are particularly fond of titles. Don’t choose a lender based on the mortgage representative’s title. Choose a lender based on overall reputation, as well as any customer reviews you can find, including filings with the Better Business Bureau and HUD. We like to think everyone in re-finance (or any industry) has our best interest in mind—and most may—but don’t lay your hand on “most.” Do your research and compare lenders to ensure you get the absolute most appropriate new or refinance loan for you and your pocketbook.
Some more healthy home finance tips: consider a 15-year mortgage if feasible. You’ll pay down the mortgage twice as fast, saving you a lot of interest! Make an extra annual payment by paying semi-monthly rather than once a month; this strategy can also reduce the length of your mortgage.
Written by: Dawn Henderson, Owner/Writer–RolandWrite Copywriting Services www.rolandwrite.com