There are some things to consider if you are wondering whether or not to take advantage and refinance your home. Recently the Feds announced their plan to purchase $500 billion in securities from Fannie, Freddie and Ginnie Mae. That news helped current mortgage rates slide to their lowest point in over a year. The rates went from over 6% to a 5.58% rate for the average 30-year fixed-rate mortgage.
Consumers often have to pay thousands of dollars in closing costs upfront to save tens of thousands of dollars over the lifetime of their loan. Deciding whether or not this is a wise option takes hours of research, knowledge of your financial situation, an estimate on how long you plan on staying in your current home and a calculator by your side.
There are many factors that contribute to the closing fee associated with a refinance loan. Consumers will have to pay from an estimated $1,250 to nearly $12,000 to refinance a home loan.
Consider this; if a fairly new homebuyer just purchased a property several months ago and has a $225,000 mortgage at a 6.25% rate, it may seem paying the national average of close to $3500 to refinance is foolish, but it will save them a bundle. If they qualify for a new loan rate of 5.25%, despite paying the new closing costs, they can still expect to save close to $40,000 over the lifetime of their new loan.
This strategy is not advised for people who plan on moving out of their house within a few years, as it will be difficult to recoup the new closing costs in the guise of reduced mortgage payments. But if you plan on staying rooted for a long time, it is a good idea to start researching refinancing options now.
