Waiting to Refinance

?Even though mortgage rates are currently at record lows, it doesn't necessarily mean refinancing your mortgage right now is a great idea. It might seem like a good idea with the current average rate for 30-year-fixed-rate mortgages at under 4% and rates on 15-year loans at around 3.25%. The result has been more consumers tempted to believe that mortgage interest rates are at the lowest point they could possibly reach right now and lenders are seeing more borrowers looking to take advantage of those historically low mortgage rates. However, the super-low interest rates only apply to borrowers with excellent credit and they can also vary by region as well.
 
The rates may be low now, but lawmakers and bankers may succeed in pushing them down even further in the near future as government officials try to move the rates even lower. The Federal Reserve is buying more mortgage-backed securities and the White House is looking for ways to help borrowers refinance even if they have little or no equity left in their homes. This leads people to believe that if the rates fall even lower and more people begin refinancing, it could help stimulate the overall economy as well. The situation may sound good, but some economists are warning that although the rates could fall a little more in the short term, they will eventually start to rise again as the economy begins to recover.
 
Considering that interest rates are now hovering around 4%, and after you add in the 2% cost for the typical refinanced loan, refinancing right now might not be the best plan. Closing costs also enter the picture and people who try to refinance every time the rates fall a bit will also find they might be losing money in the long run due to the repeated stacking of the closing costs every time they get a new loan. This means that making the decision to refinance based solely on interest rates without taking into account the closing costs, tax rates and the length of time left on a mortgage could be a costly financial mistake.
 
Conversely, waiting for a lower rate that might never happen can be risky, but if a borrower can get their lender to waive some of the various other loan fees, it might only take a half-point of savings to make refinancing worthwhile. When homeowners can get their lenders to cover their closing costs, their loans become more affordable with fewer upfront costs. The problem could also be approached by refinancing with a shorter 20 or 15 year term that allows borrowers to keep their monthly payments about the same as they were paying on a 30-year loan.