Currently, rates for a 30 year conventional mortgage are approximately 4.875 (15yr, 4.25) with no points or origination. Also, the market for jumbos (over $417,000) has recovered somewhat making an upper bracket purchase or refinance much easier.
Many consumers have home equity loans which originated before lending institutions included interest rate floors in the terms. While it’s great to be paying 2.5%, sooner or later rates will begin to rise. When they do, the long term rates now available will be a relic of the past.
Even if you decide to keep your current mortgage or home equity arrangement, now is a good time to talk with your banker or mortgage lender and see what alternatives are available. Many institutions are offering refinance deals for current customers.
We solicited comments from a couple of local mortgage lenders:
Carl Albright – Bryant Bank
Trying to find the perfect time to refinance is kind of like trying to wait to buy a stock at its 52 week low. You could get it right, but there is always a chance that tomorrow is another 52 week low. Waiting on rates to drop another eighth of a point in rate could easily cost you a quarter point in the wrong direction. The best time to lock in a rate is when rates are low enough to save monthly cash flow, or to lock in long term rates to take the uncertainty out of volatile HELOC rates.
Short and long term rates are at historical lows, but that anomaly will not last forever. The Fed will begin moving short term rates soon and when they do, there will be many homeowners who are enjoying low rates on HELOCs who will wish they had taken advantage of the low 30 and 15 year fixed rates while they had the chance. At that point, mortgage rates will already be higher and many will have missed an opportunity to lock in their mortgage debt at below 5 percent.
Anonymous Birmingham Mortgage Banker
A large segment of the population refinances when their peers refinance. The best practice for a homeowner considering a refinance is to analyze the best option for them. I encourage each customer to consider how long they will be staying in their current home. If one member of the household has the desire to move (in the back of their mind), I have found that it normally occurs and can wipe out the benefit of the refinance.
Other customers have adjustable rate mortgages that are adjusting down right now. That could be a good thing if the customer plans on moving in the next few years.
For customers that plan on being in their home long term, they need to pick a mortgage product that is a long term solution. Short term rates like equity lines are appealing right now, but history has shown they can go up very quickly. Unfortunately for the consumer, it's often too late to get a great rate on a long term fixed product when the short term rates have moved up.
This is a unique time in the market and lenders are more willing to work with consumers than in the past. Both Fannie and Freddie have special programs that allow a customer refinance up to a 125% of the value. Banks are willing to modify customer's loans, in some cases, which is a simpler process than refinancing. The bottom line is that there are choices for the consumer available.