Should You Refinance Your Mortgage?
In an uncertain economic environment it pays to take advantage of any financial savings you can get. A prime example is paying down any debt you have, such as mortgages and other loans that some might classify as good debt because they carry relatively low interest rates and may offer tax deductions. By chipping away at your borrowing costs, you’ll reduce the interest you owe over the life of your loan. With that said, it’s a good time to investigate whether it benefits you to refinance your mortgage.
In an effort to jump start the economy, the jumbo loan market and the move up housing market, the Federal Reserve started to aggressively cut interest rates in 2008. Both 15 and 30 year mortgage loans are in the vicinity of 3.5%, a historically low level.
The housing recovery has continued long enough that both leading indicators (pending home sales) and lagging indicators (Case-Shiller Home Price Index) were moving in the same positive direction. July pending home sales jumped 2.4% compared with June and 12.4% compared with July 2011. It is important to note that pending sales have been higher than closed sales all year, as the failure of homes to appraise at the agreed-upon price and tight lending conditions are holding back closings.
Based on pending home sales price data, there should be even more positive pricing news in the months ahead. The silver lining of rising home prices is more homeowners will be eligible to refinance their homes at the current near-record-low rates. That in turn gives these consumers more money to spend somewhere else in the economy. Further declines in inventories combined with near-record levels of affordability should also continue to boost housing activity and prices in the forthcoming months.
By taking an inventory of the factors lenders use to determine the interest rate and qualify you can determine if refinancing makes sense for you. Keep in mind that your property will need to be appraised as part of the process. This might force you to pay down your mortgage to obtain the necessary loan to value ratio to refinance. Lenders could assess private mortgage insurance (PMI) when a loan is more than 80% of the current value of the home or might deny the refinance outright.
Finally, you might have had a mortgage for many years and are seriously chipping away at the principal. If that’s the case, refinancing, and thereby changing the terms of the loan, could increase the total payment but in the long term lower the total interest you’ll pay over the life of the loan. Give us a call to see if a new mortgage is right for you.
Disclosure: The posted information is for informational purposes only. This message does not constitute an offer to sell or a solicitation of an offer to buy any security. All opinions and estimates constitute Karp Capital's judgment as of the date of the report and are subject to change without notice. Accordingly, no representation or warranty, expressed or otherwise, is made to, and no reliance should be placed on, the fairness, accuracy, completeness or timeliness of the information contained herein. Securities offered through Infinity Financial Services (a registered broker-dealer, member FINRA, SIPC). Infinity Financial Services and Karp Capital Management are not affiliated companies.