Would it make sense to refinance my home now or should I wait for this market to turn?
Best Answer
3127 points
EthanR answered 3 months ago …
Creezy, I'm not sure the difference in interest rates is going to be all that different when the real estate market improves. In fact, the rate could be worse, because that would mean the economy will be stronger.
The real question is, does it make sense to refinance? The answer is YES, but only if you are going to stay in the house for at least five more years, AND if the interest rate you will get will be significantly lower than the one you have now. For example, refinancing from 8% to 6.25 might make sense, but not refinancing from 6.75% to 6.25%.
If you are refinancing out of an ARM and you are worried about the rate popping up much higher, than that is a different story. One scenario that I like, which I did on my home many years ago, was to refinance from a 30 year to a 15 year, after the rates had dropped enough to where the 15 year payment was practically the same as my 30 year payment.
Make sure you shop around for both the best interest rate and terms of the loan. Don't get sucked into a low ball rate if there will be two or three points tacked onto the loan. Points are 1% of the mortgage amount and can be called either discount point or loan origination fee.
Hope I answered your question. Good luck.
Answers
671 points
rvilmur answered 3 months ago …
Mortgage interest rates are relatively high now because the banks and mortgage companies need to restock their capital after the large losses they have taken. So, I would wait for the housing market to bottom out to get more competition among the lenders and lower rates.
With that said, it depends on what your current interest rate is relative to the market rates for mortgages. If you have sufficient equity in your home to qualify for refinancing and it would drop your monthly payment significantly, then shop around for the best deal, taking all costs into consideration.
732 points
alanj answered 3 months ago …
I'd do it now, or very soon. Houses have dropped enough in price that investors are now starting to buy the cheap homes. It's only a matter of time before the general public will follow suit. This means the demand for houses will increase. When the demand for houses increases, the demand for mortgages will also increase. When the demand for mortgages increases, the interest on mortgages will increase.
There is still an over supply of homes for sale. So, there's still a little bit of time for the housing prices to bottom out. But, I don't see interest rates going to much lower if at all than it is now. Because, the banks really can't afford to go lower because they are financially hurting.
Do not get one of those sucky ARM's. Get a standard 30 or 15 year fixed mortgage.
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