Are Mortgage Rates Heading Lower?
Is it time to consider mortgage refinancing of your home loan? Mortgage applications soared 21.7% in the week ending August 5, says the Mortgage Bankers Association Market Composite Index. This was used in large part to a 30.4% jump in the group’s refinancing index.
“In a few years, these (low) rates will be a memory that people chat about at cocktail parties ” says Dan Nigro, principal at Warfield Consultants. “should lock in (these levels) for the long term and it certainly is what the government has in mind.”
But with the average rate on a 30-year fixed home loan just just below 4.5% – the lowest levels for 2011 – is now the time to refinance or buy a new home? Or should they hang on till we reach a new bottom?
Alex Stenback, from “Behind the Mortgage” blog says now is the time to act. After all the FED can move interest rates up “and this window can shut much faster than people imagine,” he says. But bear in mind too that has just said (August 2011) that interest rates will not move up until 2013 at the earliest.
Mortgage rates tend to reflect long-term U.S. Treasury rates, which have fallen in recent weeks. The 10-year Treasury note was around 2.12% on Wednesday and set a record low auction yield of 2.14% the same day.
Tips to bear in mind if you want to refinance your existing home loan, or buy a new home, now.
1. Shop around for your lender
Get an offer that is lower than what you are currently paying and go back to your current lender and tell them you are being offered a better deal elsewhere. If they don’t match it then move your mortgage. You could save yourself hundreds of dollars a month.
2. Watch out for costs – hidden or upfront
There is a rule that says if you can save 1% on your rate then it is probably worthwhile switching, but still bear in mind the various fees you will have to pay, title insurance, escrow waiver fees etc.. It may take you 3 years to recoup your fees so if you are moving in two years’ time it’s not worth the trouble.
3. Ask for a copy of your credit report
Make sure your credit history is good before contacting lenders.
You will need a FICO score of at least 760 to be in line for refinancing.
You are entitled to one free annual credit report from the three US credit agencies: Equifax, Experian, and TransUnion.
Having a good credit score makes life a lot easier, so it might be worth your while paying off any credit card debt before trying to refinance your home.
See below for general financial information for beginners on home loans, mortgage refinancing and stock trading online