Mortgage Rates Rise for Week of July 27
New home loans and refinance loan applications typically slow when rate rise. Potential homebuyers and homeowners shopping refinance rates should not worry, as current mortgage rates remain stable and widely accessible. For homeowners who want to refinance, it's important to weigh the benefits of refinancing against short-term changes in refinance rates.
Refinance Rates and Meeting Financial Goals
Although current mortgage rates are trending upward, refinancing may offer long term benefits that make it worthwhile to refinance now instead of delaying in hopes that rates might move downward. Here are examples of how a refinance mortgage can help:
- Reducing mortgage rates: This is the most common reason for refinancing your mortgage. If your current mortgage is a subprime home loan, or the rate is a point or more above current rates, refinancing may be worth the time and effort--reducing monthly payments and paying off your mortgage faster.
- Eliminating adjustable rates and problematic mortgage features: Current mortgage rates are allowing many homeowners to refinance their home loans to eliminate adjustable mortgage rates, and also remove creative features such as interest-only payments and negative amortization. Fixed rate home loans provide a consistent monthly payment amount and can be paid off sooner than home loans with interest-only payments or negative amortization.
- Cash out refinancing: If you need cash for home improvements or paying off high-cost consumer debt, current mortgage rates may be low enough to permit refinancing for an additional amount of cash.
In addition to refinance rates, considering closing costs and how long you plan to live in your home is useful for calculating potential savings. A good refinance calculator can help you determine your breakeven period--that time when the interest saved exceeds the cost of the refinance.
