4 Good Reasons You Should Refinance Your Mortgage Now

1. Crazily Low Mortgage Rates

According to Freddie Mac's archives, the record lowest average weekly rate in recent history for 30-year fixed-rate mortgages (FRMs) was hit in November 2012, when it dipped to 3.31 percent. At the time of writing, in the first half of August 2016, it's 3.45 percent. Think it's going to fall further?

Well, it might. But bear in mind a bit of history. As recently as 2003, people were amazed when that same rate reached its then record low ... of 5.23 percent. In February 1982, it topped 17.60 percent. When it comes to cheap mortgages, we're living in crazy times.

2. Win-Win

Suppose mortgages get even cheaper, and plunge into the unknown territory of 2.0+ percent rates for 30-year FRMs. That's not out of the question. Mortgage rates are closely tied to 10-year U.S. Treasury bonds, and the global market for government securities (bonds, bunds, gilts and so on) is a constant source of amazement. For example, yields on German bunds are currently negative. In other words, investors are paying for the privilege of lending the German government money. This is Alice-in-Wonderland economics, and few experts are brave enough to categorically rule out just about any scenario you could suggest.

So what happens if mortgage rates tumble much further? Simple! Consider refinanancing your mortgage again. As a rule of thumb, many suggest that it's worth going through the process whenever you stand to shave around 1 percentage point or more off your existing rate (take 1 percentage point off a 4.75 percent rate, and you get a 3.75 percent one). But it's now easy to find online refinance calculators that can model your own personal circumstances, and give you a good idea of the dollars and cents you stand to save. You may find that's enough for you to make a decision.

3. Zero Closing Costs

Some lenders offer deals with zero closing costs. With most of these, you're going to end up paying those costs (and maybe more) sometime down the line, usually in a slightly higher rate. But you may not care about that if the savings on your monthly payments are high enough, and all that's standing between you and them is a shortage of cash.

If your savings are that low, you may also be worried about your credit score. Indeed, everyone refinancing should worry about their credit reports and scores, because those play a big part in determining the mortgage rate you're going to be offered. TransUnion, of course, offers a fully featured credit monitoring service that lets you track your score, and provides you with updates and tips.

4. Rising Home Prices

Average home prices nationwide rose 5.7 percent in the year ending June 2016, according to CoreLogic. And the company forecasts a rise of 5.3 percent for the year from then to June 2017.

Such increases are great news for homeowners. Unless you're taking serious cash out of the deal, you stand to get a better rate when you refinance your mortgage, for the same reasons a high down payment typically gets you a more attractive rate when you're buying. Meanwhile, RealityTrac reckons 6.1 million borrowers whose homes were underwater (they owed more on their mortgage than the market value of their property) at the height of the housing crash now have their heads above water again. Many of those, who were effectively shut out from refinancing, can now go ahead.

 

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