Homeowner Headquarters

How to's and money-saving tips from resident homeowner and mortgage professional, Cathy West

Now is the time for current owners to refinance

For each of the last several years, millions of homeowners have likely at least considered moving to take advantage of mortgage rates hovering at or near record lows. The idea behind doing so is that this would likely save owners thousands of dollars over the remainder of their loans. However, many have also stayed out of the market even though a refinance would have been a huge benefit to them, and the time for them to take advantage of extreme affordability now seems to be running out.

The fact of the matter, though, is that many of the people who have not yet refinanced are in two very different situations these days, and have been for a while. The first of these groups, comprising potentially millions of Americans, are those carrying higher interest rates – often in the 6 percent range or more – but who could not afford to actually refinance their home loans. These are people who were likely hit particularly hard by the economic downturn, and whom the recovery usually has not reached in full yet.

Why are they facing those problems?
These are likely homeowners who ran into financial difficulties that weren't particularly severe – insofar as they did not result in foreclosure – but which were certainly bad enough that a refinance that would save them a significant amount of money each month was simply unattainable. They likely could not afford the closing costs associated with such a transaction, even despite the fact that they would likely save several times that amount in the coming years thanks to their significantly lowered interest rates.

It's not that these people were uninterested in refinancing their mortgages, but rather that they were not able to take advantage of the deals available to them.

On the other hand, there were likely people who looked at rates approaching 4 percent, and simply said, "No thanks." However, it's likely that these people just grew too accustomed to mortgage rates in the area of 3.5 percent, or perhaps even lower, so rates suddenly seem unreasonably high, even if the current levels of around 4 percent (or a little less) are actually quite affordable in comparison with pre-recession and historical norms alike.

What's changing?
However, experts in the housing market say that anyone who has been on the sidelines and could reduce their mortgage rates by at least half a percentage point these days (for example, dropping from 4.5 percent to just 4 percent) would likely do well to get into the market these days. The fact is that mortgage rates are poised to rise over the course of this year, and the longer people wait, the more likely they will be to get less financial benefit from a refinance at all.

Indeed, people who end up waiting a few months to even think about refinancing – for any reason – could be locked out of the historically great deals available today, and they might never get a chance this good again.

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