Have you refinanced your mortgage yet? If not, what are you waiting for? Rates are the lowest in history and a lot of the issues in the mortgage industry seem to be gradually straightening themselves out.
Forget the bad news on the financial pages, and see now for what it is: a unique window of opportunity to refinance and lock in the lowest mortgage rates in history.
Low rates won’t hang around forever
People get spoiled by low interest rates. If they’ve been around for a while it’s easy to assume that it’ll always be that way. As low as rates are now, people may even be waiting for still lower rates before refinancing. That can prove to be a major mistake.
As a former mortgage guy, one thing I learned is that while rates tend to decline very gradually, when they rise they do it very quickly. A substantial rise in rates can occur in just a few weeks, or even days. It’s called a rate spike, and once it happens you won’t be able to get yesterday’s lower rates. They’ll be gone no matter what lender you go to.
Mortgage rates are set by the bond market, and much like the stock market, the bond market can be extremely volatile. Sudden bad news can cause bond prices to fall, which will cause interest rates to rise. Good news can get the job done too. An improving economy with increased loan demand could cause the historic rate decline to reverse and start heading up.
We can’t know with any certainty where rates are heading, but with them being at historic lows the betting has to be that higher rates will be the most likely direction. Refinance your mortgage now before a rising trend takes shape.
Affordable refinance programs won’t be around forever either
Though it’s true that a lot of homeowners have been prevented from refinancing due to lost equity, that situation has been at least partially remedied by government programs such as the Home Affordable Refinance Program (HARP). Under the program, you can refinance your mortgage even if you’re in a deep negative equity position on your home.
But like low interest rates, we can’t assume this program or others like it, will be around forever. HARP was created specifically to deal with the fallout of the housing/mortgage meltdown, and at some point it might be determined that it’s too costly to maintain. Budget deficits have a way of making that happen.
If you don’t have enough equity to refinance, check with a lender to see if they participate in the HARP program, and what the specific requirements are.
Check your credit report before you do anything
One side of the mortgage lending process that IS likely to stay around for a very long time is stricter credit guidelines. The lose guidelines of the 1990s and early 2000s are largely what led to the meltdown, and it’s not likely that they’ll come back. Today you have to have good credit in order to do just about any kind of refinance, so you’ll need to keep it cleaner than ever.
Be sure to check your credit before applying for a mortgage. If there are errors or any kind of derogatory information it could take weeks or even months to repair. Since it’s harder to pass muster when it comes to credit these days, it’s important that you clean up any problems in advance. You want to go into the mortgage application process as strong as possible and credit is where that should start.
There is a combination of factors that weigh heavily in favor of refinancing now. How long they’ll stay around is anyone’s guess, but you can’t lose by locking in the lowest mortgage rates in history.