Monday, August 15, 2011
Is Now the Time to Refinance Your Mortgage?
Original Post 6:30AM 08/15/11
Some homeowners in their 50s are taking advantage of historic low rates to refinance their homes and score themselves a mortgage-free retirement.
Mark and Jan Sass, 55-year-olds who live in Cincinnati, Ohio, refinanced their home last week to lock in lower rates, Reuters reported. They switched from a 20-year fixed-rate loan of 4.875%, with 12 years remaining, to 10-year mortgage with a 3.5% rate.
"The opportunity to look 10 years out and know that – unless things change – we won't have a mortgage when we retire looked like a smart decision," Sass told the news agency.
A Refinance surge
They aren't alone. U.S. banks have seen a recent surge in loan applications that's almost entirely due to refinancing, Greg McBride, senior financial analyst at Bankrate.com, told DailyFinance.
Mortgage applications for the week of Aug. 5 rose more than 21% over the previous week and three quarters of those applications were for were for refinancing, according to the Mortgage Bankers Association, also known as MBA.
"Over the past month, refinance application volume has increased by 63%," Mike Fratantoni, MBA's vice president of research and economics, said in a statement. "Refinance applications for jumbo loans increased by almost 75% relative to last week. Despite these low mortgage rates, applications for home purchase have remained little changed through the summer."
According to a Bankrate.com survey released Thursday, the average 15-year fixed rate for a mortgage reset is 3.61%, while 30-year fixed-rate mortgages average out at slightly less than 4.5%. The jumbo 30-year fixed rate set a new record of 5.02%, the Bankrate.com survey found.
Should You Refi?
So with all the chatter about low interest rates, is refinancing right for you? To answer that question -- or to pick the right mortgage for a refinancing deal -- homeowners should consider their home equity, credit history, time horizon, age and cash flow.