3 Reasons Today is the Best Time to Refinance - not Tomorrow

Posted by Jason on March 27, 2014

Since the housing market bubble burst in 2008, interest rates have fallen from an average of 6.03 percent to 3.98 percent at the end of 2013. (1) However, this trend of lowering rates has started to reverse itself as the housing market moves towards positive growth. Interest rates are predicted to reach an average of 4.9 percent and 5.2 percent in 2015. This growth spurt is excellent for your home's long term value, but when you've gotten yourself out from an underwater house and you want to refinance your loan to better match your home's actual value, it's not the best news in the world. However, now is going to be the best time to refinance for the projected future for a few reasons.

1. While you would have been better off refinancing several years ago, right now is your best bet to get in at the tail end of the low rates before they hit pre-2008 numbers once again. This is your last opportunity to lock in a relatively low interest rate, which is likely to stay 2 percent or lower below the average rates over the next ten years. While you may not feel that a percentage point or two makes a big difference, when you run the numbers over the life of the mortgage, it adds up quick.

2. Banks and government regulations continue to change requirements surrounding mortgage and refinancing qualifications. To avoid another housing bubble as the economy recovers, lenders are tightening lending requirements. It's possible that while you qualify for a refinance now, new regulations may put you in the borrower category who are unable to qualify for a refinance. This is especially relevant if you encountered any credit difficulty post-2008. A bad mark on your credit from years ago that may not be a big deal now, may be enough to get you denied when creditors are looking harder at all of their applicants.

3. One of the big benefits of refinancing your mortgage is to lower your monthly payment, especially if your house value has changed drastically after you purchased it. This will give you enough equity to qualify.

References:
(1) http://www.freddiemac.com/pmms/pmms30.htm
(2) http://www.mortgagebankers.org/files/Bulletin/InternalResource/86096_.pdf