One thing that many homeowners have probably considered since closing their mortgages was how much they pay on those loans every month. While millions of Americans are locked into extremely affordable home loan terms for the next decade or more, the fact remains that there are millions more who might benefit from going through the process of a refinance. The question they may have is how they know whether now is a good time for them.
The first thing for homeowners to keep in mind when wondering whether a refinance is right for them is the general rule of thumb that if current mortgage rates are half a percentage point below what they're currently paying, going through a refinance would probably allow them to save a bit of money on their payments each month. This is obviously not true for every homeowner (those who are within a few years of paying off their loans, or who have just started doing so, would likely not benefit), but for long-time homeowners with a decent amount of years left on their term, the benefits are usually going to be worth the cost.
Data shows that there are still millions of Americans who have outstanding mortgage balances and who would benefit from a refinance, but who have not taken the step. Part of the reason for this is that many of those owners simply can't afford it, which is understandable. But there's another group who look at mortgage rates today versus those in 2012, for example, and simply say, "No thanks."
But the fact of the matter is that rates today are still so affordable in comparison with historical norms that comparing them to those when rates were at the lowest ever (they were in the mid-3 percent range a few years ago, and again at the start of 2015, albeit briefly) isn't really fair or reasonable. Even if the rates today were to jump sharply – and there's no sign that they will – they would probably still be below pre-recession norms. The way people view mortgage affordability has shifted significantly in the last few years, and as a result, some people may be missing out on deals that could save them tens of thousands over the life of their loans.
Knowing when to strike
And that hesitance to take advantage of rates will probably come back to bite them sooner than later. If they're concerned about rates in the mid-4 percent range appearing unaffordable, they ought to keep in mind that experts generally agree that rates should hit 5 percent before the end of 2015. And barring major economic issues in other parts of the world, the robust improvement of the American economy should continue to move along in much the same manner seen for the last year or so, and bring mortgage rates higher as a result, not lower.
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