Does it make sense to refinance as interest rates rise?
1.4 million borrowers have lost the interest rate incentive to refinance, but there are still a few good reasons to consider refinancing even as rates are rising.
30-year fixed interest rates are up nearly a half a percentage point since January.
So far, the rise in rates isn’t hurting the housing market. Many analysts even expect Americans to step up the pace of home searches and mortgage applications, in anticipation of climbing rates in the future, according to Market Watch.
Don’t let the rising rates discourage you.
Refinance when it makes sense to you. Take into consideration how long you expect to hold on to the mortgage and the property, according to Mortgage Network. Here are 4 points to help you make your decision.
- What is your current rate? You could still get a rate that is lower than what you have now. However, be sure to consider the costs. Find out how long your payback period will be, based on the mortgage costs and the new interest rate. If your payback is 1 or 2 years, but you are planning on selling in ten, it may make sense to refinance.
- If you don’t already have one, you can refinance into a fixed-rate mortgage. This helps avoid the risk of a higher payment.
- Find out if you can refinance to a loan without private mortgage insurance. Some loans require private mortgage insurance, no matter your down payment, but not all. You’re usually paying private mortgage insurance if you made a down payment lower than 20%.
- Rising home values may give you the opportunity to get cash from the equity in your home when you refinance. The money can be used for any purpose.
If you have enough equity in your home, are considered credit worthy, and have a job- meaning you are paying your current mortgage faithfully- you may qualify for a refinance mortgage. So, even as rates are rising, you may still save money.