With the almost inevitable likelihood that mortgage rates will rise again shortly, there is no better time than now to refinance your mortgage. Mortgage rates will move up and down according to the funds rate of the Federal Reserve Bank of New York. Once the yield on ten year bonds moves, so will the mortgage rates. That is why refinancing now may be the best time ever to get the best rate possible on your mortgage.
The key factors in deciding if you should refinance at these record low rates involve how long you plan on staying at your residence and how much you currently owe on your mortgage. While it may be beneficial to most people to refinance their mortgage as soon as possible, some may run into a problem where they just plain won't qualify.
Equity is a key factor in refinancing. Even if you are not looking to get any cash out of the refinance, the equity still needs to be there even if you only plan on paying off your existing mortgage. This could become a problem if the company you are looking to refinance with is going to add in closing costs and points to your mortgage. While some lenders will cover these costs, others will include these fees in your refinance, which will mean you will end up with a bigger balance on your mortgage, which in turn will effect your equity.
Much depends on where you live and the trends in the real estate market in your area. Some areas may have experienced an increase in property values, while others may have had a decrease in value. This means your equity in your home may have improved, thus meaning you may be in a better position to refinance. In a situation where the property values have decreased, you may no longer have enough equity to refinance. For example, say you have a $200,000 mortgage on a home that was worth $220,000 a year ago. You apply to refinance but the new appraisal indicates the value of homes in your area are now only $210,000. Since your equity is now well over 90 percent, the chances of being able to refinance will not be good.
There are also other factors that may mean that refinancing at this time won't be as beneficial to you as someone else. If you plan on selling your home in the near future, or if it is currently on the market, it will not be beneficial to you to start a new loan by refinancing. When selling your home you want to keep your mortgage balance as low as possible so you can make as much as you can from the sale of the property. Refinancing could lead to additional fees which will drive up your balance, resulting in less profit from the sale of the home.
Rates on mortgages are at an all time low, but some homeowners could be in a situation where it may not be possible, or it may not even be sensible, for them to think about refinancing at this time. Homeowners who are planning to sell their property shortly or others who have too high of a balance or don't have much of a balance left on their current mortgage may find that refinancing now would not be a wise decision for them at this time, no matter how low the rates are.
