 |
|
|
|
Information on mortgages, home equity loans, and consumer credit to help you use the power of financing to your advantage.
|
|
|
|
|
Untitled Page
|
|
|
|
|
|
|
Mortgages > Refinance
Should I refinance my mortgage?
THERESA AGOVINO, AP Business Writer. Associated Press
Copyright Associated Press
Q. The Federal Reserve recently lowered interest rates again but mortgage rates are rising. Should I refinance my mortgage and if so, what type of mortgage should I consider?
A. Mortgage rates are still at low levels not seen since the 1960s. However, they have been creeping higher, so now is a good time to consider refinancing.
The average interest rate on a 30-year mortgage in late July was 5.7 percent, up from 5.1 percent in late June, according to the Mortgage Bankers Association of America.
Mortgage rates track 10-year Treasury bond yields, not the federal funds rate, the rate used by the Federal Reserve to implement its monetary policy. That's why the Fed's recent action hasn't affected mortgage rates.
Rates on the 10-year bond have been rising because investors believe the economy is improving, so they have been selling bonds and buying stocks. Bond yields and bond prices move in opposite directions, so when prices fall, bond yields, or the interest they pay, go up.
If investors continue to believe the economy will improve, mortgage rates will continue to edge upward.
"If you think you can lower your rates in a meaningful way, take a look," said David Lereah, chief economist at the National Association of Realtors.
Doug Duncan, senior vice president and chief economist at the Mortgage Bankers Association, suggests people considering a refinancing call their lenders to see if they offer any streamlined or discounted options to complete the process. Otherwise, refinancing can cost several thousand dollars. If a homeowner plans to sell in a year or two, refinancing might not make sense because the lower mortgage payments might not compensate for the refinancing fees.
Duncan suggests those who think they will stay in their home for three to seven years and might want to consider adjustable rate mortgages. Balloon mortgages, which require the loan to be paid in full in a relatively short amount of time, such as five or seven years, are another option.
Rates on such mortgages differ according to the terms and length, but the interest rates are substantially lower than 30-year and 15- year mortgages because the lender is taking less risk. The interest rate on adjustable mortgages changes annually, although some have clauses that will cap the amount it can rise in one year. Some balloon mortgages have a set rate for five years and then the balance is due. Others may have an adjustable rate for five years.
Such loans make sense for people who think they will be moving in a few years or have enough wealth and income to take the risk of a substantial hike in mortgage rates, Duncan said.
Lereah said most people buying homes tend to own them for more than five years, so it's probably best for them to stay with a 15- year or 30-year fixed mortgage. "Rates are so low. Why gamble?" Lereah said.
• Apply now for a home loan!
Reproduced with permission of the copyright owner. Further reproduction or distribution is prohibited without permission.
Dateline: Undated
Text Word Count 482
The tips on this website should be considered food for thought only. Lendingtips.com is a clearinghouse of ideas, not a professional adviser. Before any important decision, please consult the appropriate professionals (lawyer, accountant, real estate agency, broker etc.).
|
|
|
|
|
 |
• Mortgages > Refinance Articles Archive.
• ARM vs. Fixed Rate Mortgage. Use this calculator to compare a fixed rate mortgage to two types of ARMs, a Fully Amortizing ARM and an Interest Only ARM.
• Mortgage Loan Calculator. Use this calculator to determine your monthly payment and amortization schedule.
• Refinance Breakeven. Should you refinance your mortgage? Use this calculator to determine when you will breakeven!
• Amortizing Loan Calculator. Enter your desired payment - and let us calculate your loan amount. Or, enter in the loan amount and we will calculate your monthly payment!
|
|
|
|
| ©2005 Lendingtips.com All rights reserved. |
|
|
Lendingtips.com 464 Oak Avenue Naples, FL 34108
Phone (239)877-7835 Fax (239)594-5686
|
|
|
|
|
