The Mortgage Banking Association (MBA) has just released its April 2015 statistics, concluding that credit availability for home mortgages has inched upward again. This is a continuation of a trend that has been ticking ever higher since January of 2015.
On the other hand, mortgage interest rates have followed bonds (which the invariably do) with increase in early May. While this may also reflect mortgage demand which is usually stronger in the go-go home sales months of May - August, it may also be telling us something about the direction of interest rates due to the competition for low interest bonds worldwide. Too many bonds chasing not enough cash will drive up rates.
The question you might ask yourself is this: "Should I refinance my home mortgage now?" Here are five solid reasons to do so.
1. Lock in historically low interest rates - Even if mortgage rates have moved up .3 over the last couple of weeks, current rates of 3.8 on 30 year fixed loans is not normal, and will likely never happen again soon, if ever, once the Fed decided to tighten credit and increase base rates.
2. To realize optimal cash out - This may be the optimum value on your home for now. While the supply demand curve for residential real estate appears to favor owners for the next few years, there is likely to be at least a short term dip in home prices if interest rates rise by a point or two, back to normal levels. Moreover, prices usually peak in mid summer and drop of in the fall. If you want to get cash out, now may be the best time.
3. To eliminate your mortgage insurance - Whether through FHA or through a private insurance company, you may be paying as much as 1% or more per year to cover premium mortgage insurance. Most private insurance can be eliminated if you reach 80% equity in the home. Some FHA plans don't have this option. But you may be able to refinance the loan to get rid of the FHA premium.
4. To get rid of higher priced debt like credit cards of finance companies - Why would you want to pay 8%, 12.5% or even 23% for borrowed money, when your local mortgage lender will be happy to provide you that money for $3.8%. If you have even $10,000 in credit card debt at 14%, you are shelling out $1400 per year for that credit line. Save $1000 a year with a refinance.
5. Prepare for a time of less or no income - Are you getting ready to retire? You won't likely be able to borrow against your home after your income stops. While for many homeowners, it is wiser to sell the home for cash or downsize to take out cash, for many the best approach is to to refinance the existing home to reduce the interest rate and/or take out cash. With such low rates today, you can generally invest the money at a better return, maybe even much better.
If you are thinking about refinancing your home mortgage, you