Refinance applications are down to 2009 levels as mortgage rates have shot up past 4 percent again. Homeowners may have been scared away by recent rate increases, but now is still a good time to see whether a refinance would work for you.
Here are three reasons that you shouldn’t wait to refinance your mortgage:
No. 1: You can still take advantage of historically low mortgage rates
Mortgage rates are no longer below 4 percent, but they are still historically low. Homeowners waiting to see whether rates will drop below 4 percent again may have a long wait.
Brian Koss, executive vice president of Mortgage Network in Danvers, Massachusetts, says you shouldn’t expect a return of the sub-4 percent mortgage rates. All of the signs (a healthier U.S. economy and higher international interest rates, for instance) are pointing to higher mortgage rates.
Koss expects mortgage rates to increase in the near term, but doesn’t expect a huge jump. In fact, we may see a slight dip, but more likely a slight increase.
“Fundamentally, (the signs) are pointing to higher rates, but still in the very tight range compared to where we have been in the past,” says Koss.
Trying to time the mortgage dips is an imperfect science, but the clues show that another increase could happen later this year when the Federal Reserve may raise interest rates. The Federal Reserve does not directly set mortgage rates, but its actions can create a ripple effect on rates. On the other hand,the financial situation in Greece could shake financial markets and cause a rate decrease.
Koss warned against trying to time the next possible dip.
“Trying to time it perfectly doesn’t work,” he says.
Given the current climate, Koss suggests those ready to refinance start the process now and ask a trusted lender to lock in a low rate while you’re going through the process. Remember that rates can fluctuate at any time and often change multiple times a day.
Any rate decrease will be a “panic event” and not a “fundamental move,” he said, so you’ll want a trusted lender prepared to lock in a low rate for you.
Keith Gumbinger, vice president of HSH.com in Riverdale, New Jersey, said, “Mortgage rates rise and fall for a lot of reasons. You can look for clues about what will happen by following economic reports, such as the statements of the Federal Reserve after their meetings every six weeks and the monthly employment report that comes out on the first Friday of every month. Rates will rise or fall depending on those reports and generally follow along with the fluctuations of 10-year Treasury bills. You can also follow mortgage rates through sites like HSH.com.”
No. 2: You could save more than $200 a month
More than 6 million borrowers could benefit and qualify for refinancing, according to a recent Black Knight Financial Services Mortgage Monitor Report.
Nearly 3 million borrowers in a traditional refinance and 300,000 of the HARP-eligible population “could save at least $200 per month,” according to the report. Fourteen percent in traditional refinancing and 23 percent in HARP-eligible populations could save $400 or more, according to the report.
U.S. homeowners could save $1.5 billion each month if all eligible candidates refinanced.
To show the importance of low interest rates, Black Knight Financial Services Mortgage Monitor Report suggested that an increase of half a percentage point would cause 42 percent of borrowers (2.6 million people) to fall out of the “refinanceable population.”
Check out our Refinance Calculator to see how much you could save.
No. 3: You may be eligible for HARP
The Federal Housing Finance Agency (FHFA) announced this year it is extending the Home Affordable Refinance Program (HARP) through September 2017.
The program was created in March 2009 and geared to homeowners who are underwater but current on mortgage payments.
More than 3 million homeowners have refinanced through HARP. More than 600,000 eligible Americans have until September 30, 2017 to take advantage of this program.
To qualify for the low interest-rate program, mortgages must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.