Should You Refinance Now? What If Rates Keep Heading Lower?
Mortgage rates are are serious lows. I have many people telling me these days that rates will never be this low again. Therefore, it’s a great time to refinance. While, it might indeed be a good time to refinance, I often remind these people that people have been saying the same thing about rates now for years. They’re never going to be lower, until they are indeed lower a year later.
So, should you refinance? Maybe.
I’m in the camp that thinks rates will keep going lower. In an effort to somehow drum up demand and to create annual re-fi booms, I think the government will continue to suppress rates. While 3% rates on a 30-year fixed mortgage won’t fix the housing market, it could save you some money each month.
The problem with continuously refinancing, of course, is that most people add a few thousand in closing costs onto their mortgage. Last time I refi’d, I essentially added $4500 onto the balance of my loan. By saving just over $200 a month on my payment due to the refinancing, it was easy to calculate that I’d break even in about two years. Ok, that’s fairly simple.
Again, the problem is refinancing every couple years continuously adds on money to your loan and essentially starts you over at a new 30-year term.
So, here’s an idea… if rates keep going lower, to where 30-year fixed mortgages are going under 4%, consider refinancing to a 15-year mortgage with a rate possibly somewhere in the 2% range. Get a better rate, but keep yourself on track to get out of debt completely. Now, there’s a good idea.
I’ll have my eyes on such an opportunity in the coming years.