“Those who cannot remember the past are condemned to repeat it”
– George Santayana
Can you remember the interest rate on your mortgage when you purchased your first home?
I asked this question on facebook a while ago and I received a wide range of answers. Most rates were over 6%. I now hear people in our industry talking about how rates are going up and the activity of refinance loans will dry up.
I do believe that the total volume of Refi’s will slow down, but not completely come to a halt. There are many homeowners in California who have not been able to refinance in these past several years because property values were low and there hasn’t been enough equity in the homes for them to qualify.
A new opportunity is available now for people to look into their financing options. Interest rates remain low and property values are increasing. This means that some homes will no longer be underwater and others may see an increase in equity.
Is it a good time to refinance now?
Generally speaking, yes, now is a good time to refinance – if it makes sense.
You will need to explore your options based on your unique situation, needs, and future goals. After you review the numbers, you will be able to decide if now is the right time for you or not. This will be different for everyone.
Here’s the kicker…
If you put off refinancing now, there is a good chance that you could miss out on very low interest rates. I certainly can’t predict how soon and how much the rates will increase in the future, but we can take a good look at where interest rates have been.
The History of Mortgage Rates
Freddie Mac has tracked the history of 30-year fixed rate mortgages since 1971. The average mortgage rate between 1980 and 1984 was over 13%. And that’s a traditional fixed-rate mortgage!
The graph shows interest rates in 1981 at over 18% with 2 Points in cost.
And guess what? If you talk to seasoned real estate agents about the market during those years, they will likely tell you that people still bought homes, sold homes, and borrowed money despite the market conditions.
The housing and market crash of 2008 was also tough –very tough. But we still did business.
See the historical graph here: http://www.freddiemac.com/pmms/pmms30.htm
You will see that rates have recently been in the 3’s. That’s crazy-low. That’s cheap money.
Even though rates have moved up a bit, they still remain relatively low. If you hear people talking about rates being higher right now, I encourage you to take a step back and look at the bigger picture.
Is a 5% interest rate too high for a 30-year fixed mortgage? I say absolutely not. Compared to the rates we’ve seen in the past, even a 5% rate would be a good deal in many cases.
The good news is that most rates are still in the 4% range. So if you can take advantage of purchasing a home or refinancing a property before rates climb higher, do it.
Do it now.
Exploring Your Refinance Options
Contact your favorite mortgage broker or a loan officer at your bank or credit union. Find out about your available options for a 10, 15, 20, or 30-year fixed rate mortgage.
Ask the Loan Officer to provide you a cost analysis to show you how quickly you would be able to recoup your investment of closing costs and fees. He or she should also explain how much money you can potentially save over the life of your loan. (Assuming you don’t pull any cash out at closing.)
In the long run, you will be glad that you were able to secure long-term financing with such low interest rates – as long as you can qualify.
If you find that you cannot qualify for a Conventional or Government-backed mortgage for any reason, please feel welcome to reach out to us. We’ll be happy to review your options.
Private money loans will have higher interest rates than a Conventional mortgage, but there are other reasons and benefits for refinancing sooner rather than later.
Potential reasons for refinancing include:
- Consolidating your consumer debts such as credit cards, car loans, student loans, etc.
- Consolidating your 1st and 2nd mortgages into one single loan
- Cash out for home improvements or to finally complete your unfinished projects
- Buying out a partner or joint owner of your property
- Paying off your delinquent property tax liens
- Cash out for other real estate investments
- Paying off an existing private money loan
There’s no doubt that getting your mortgage loan through a bank or credit will provide you the lower interest rates. The reality though, is that not everyone will qualify due to a number of reasons.
Thank you very much for taking the time to read our blog. Please feel welcome to post your comments below.