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Mortgage Rates Go Up, then They Go Down, When is it Right to Refinance?
by Gabriel Traverso
CMR Columnist
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Mortgage interest rates are in constant flux, though the general track seems to be an upward one, but how do you know when it's the right time to refinance your mortgage?
Knowing When to Refinance
Mortgage rates climbed to an eleven-month high of 6.74% for 30-year loans, only to drop back down to 6.69%. How closely should you monitor interest rates if you're thinking about a mortgage refinance? The old rule stipulated that you should wait until mortgage interest rates had dropped two percent below your current mortgage rate before refinancing, but the reality is--there are no hard and fast rules on refinancing. Here are some of the top reasons people refinance:
- Adjustable-rate mortgage (ARM) resetting: when payments start to rise on your ARM, refinancing is usually a good idea. A fixed-rate mortgage could help lower your monthly mortgage payments.
- Shorten the life of your home loan: if you've already paid ten years or so into a 30-year mortgage, refinancing to a 10 or 15-year loan shortens the amount of time it takes to pay off your home loan.
- Lower your monthly payments: similar to the above scenario but with a different goal. Let's say you're ten years into your mortgage and need to lower your monthly mortgage payments. Refinancing to another 30-year loan can also reduce your monthly payment.
- Home improvements: just one example of tapping into your home equity for cash. A cash-out refinance is a great way to take cash out of your home for remodeling projects, college educations, or even just a vacation.
Remember that the right time to refinance is entirely up to you and your situation. Talk with your mortgage lender to get all your questions answered and see if now is the right time for you to refinance.
Sources
The Washington Post
About the Author
Gabriel Traverso is a freelance writer, professional musician, and artist. He resides with his family in Reno, NV.
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