Time to refinance?
The volume of applications to refinance mortgage loans keeps rising as interest rates remain low. The Mortgage Bankers Association said today that applications rose 22.1 percent last week, even as the average rate on a 30-year fixed loan climbed to 5.60 percent from 5.49 percent. The volume of refinancing applications has almost doubled in the last half-year, and has reached the highest levels in four years.
Should you consider refinancing?
Many homeowners can't refinance because they owe more than their home is worth, or because tighter lending standards prevent them from qualifying for new loans. Meanwhile, people with jumbo mortgages are stuck in a holding pattern: Pending legislation in Congress may reduce the interest rates on those high-dollar loans.
But for people with equity, good credit, and a higher interest rate than those now available, this could be the moment to get a new loan. The major question to ask is how quickly you'll recoup the cost of refinancing through lower monthly payments. (Companies that advertise "No Closing Costs" are simply rolling those costs into the amount of the loan. You should still calculate how long it will take you to recoup that equity.)
Holden Lewis of Bankrate.com talks about making the refinancing decision here.
If you want to do the math yourself, try the refinance calculator at dinkytown.net, which I like for its flexibility and its precision.
A final note about the Mortgage Bankers survey: The volume of applications for home purchase loans dropped 17.7 percent. As I wrote last week, low interest rates aren't enough to get the real estate market moving again. Refinancing applications now comprise 73 percent of all loan applications.
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