The money question: refinance or wait?
The current real estate market is creating people to question their next move. Sellers are struggling as they became used to being spoiled by the 2000 to 2005 booming years when people would ask to buy your home for top dollar before you even put tit on the market. And buyers have to decide if they should wait for prices to drop further or take what they can get.
Deciding to wait or not is always an involved, difficult decision, especially when dealing with your mortgage. Besides the housing market experiencing a decrease in sales, mortgage rates have caused much concern around the nation.
After 17 consecutive periods of rate inflation the Federal Reserve recently halted the increase. But for how long? This question has spurred the concern of whether you should wait to refinance. Your decision could cost or save you thousands of dollars.
The article, “Should I Refinance my Adjustable Rate Mortgage Now or Wait for the Interest Rates to Drop?” posted on jumboloanrates.net and written by Maria Ny, attempts to answer this question or at least provide options to think about when contemplating refinancing.
Whether to refinance or not becomes even more crucial for the estimated 25 percent of mortgage borrowers who will have their rates rest in the end of 2006 or 2007.
“This means your interest rate is adjusting, and probably sooner than you think, especially if you're holding 2/28 or 3/27 hybrid ARM. You know your payment is increasing, maybe to as much as $300 per month, as the rates continue to rise. So, now the question is whether to refinance into an interest only mortgage, another ARM or go with a fixed rate mortgage.”
If you plan on living at your current residence for only a couple more years, you may want to consider switching to an interest-only mortgage that offers a longer fixed rate period before the interest increasing period starts up again.
“The introductory rate may be higher than for your old loan--an average of about 6.09% for a 1-year ARM and 6.59% for a 5-year ARM, up from about 5.2% this time last year, but probably a lot less than what you will be paying when your interest rate adjusts. If you plan on staying for a long time, you may want to get a 30 year fixed or 40 year fixed mortgage rate loan. The average cost for a 30-year fixed-rate loan rose to 6.93% in Interest.com latest survey, and Federal Reserve Bank raised the rate it charges banks to borrow money another quarter-point last week. 40 year fixed rate mortgages will probably run you anywhere to one quarter to one half of a percentage point higher.”
Mortgage rates were expected to reach 7 percent in August until the Fed reserve issued the halt. If rates do eventually climb up to 7 percent, the question will be even foggier. Do you want a fixed rate of 7 percent? This is still much lower than the 1980s (around 18 percent), but considerably high compared to recent years.
But if you decide to wait to refinance or never refinance, you risk paying rates as high as double figures. This decision would cost you hundreds to thousands of dollars.
Hurry or don’t hurry to refinance. Just make sure you are confident in your decision before signing anything.
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