Should I Refinance My Mortgage?
Should I refinance my mortgage loan? This is the prime question in the mind of many people who want to go for a home mortgage refinance loan
. Though the Federal Reserve is no more in the mortgage scenario, and the economy is getting stronger, there are warnings by some economists that the mortgage rates may just rise from their historical lows. This is now a dilemma for borrowers who have home equity lines of credit or adjustable rates of mortgage. The question now is should they exchange their low rate loans for the costly fixed rate loans? Or should they take a risk and stick with the honeymoon of adjustable rates and think that the mortgage rates won't go high. The answer to this dilemma about refinancing mortgage loan or no actually depends on how long people or borrowers ;prefer to live in their homes and how much is the predictable rise in the interest rate. Those who are going to move in the next few years to come do not need to go for the fixed rate unless they are sure that the rates are going to go up in jiffy. Mortgage rates moved high in the days after the Fed stopped its purchases of mortgage-backed securities, by April end. But several big banks decided to slash residential mortgage rates as investors shifted money into Treasurys and other safe havens. The Mortgage Bankers Association lately has predicted that the mortgage rates can increase to 5.8 percent by the end of the year, a level that has not been witnessed ever since November 2008.
Adjustable-rate mortgages, or ARMs, have been sticking at 4% or lower. Many mortgage lenders offer fixed rates for the first 3, 5 or 7 year period before reorganizing annually. ARMs are attached to short-term interest rates and go up when the Fed raises the federal-funds rate. The financial experts believe that the Fed should start raising rates by the end of 2010. But no one knows how high the mortgage rates can go.
If the Fed increases mortgage rates by 2 percentage points, it would bring adjustable-rate mortgages into a bumpy equivalence with the present fixed-rate mortgages. But speculating the Fed to increase rates all the way to that level could be perilous, because fixed-rate loans can rise too.. The question boils down to facing the flak now or risking more pain in the future. Coming down to the question of how long should borrowers live in their present houses. Financial experts say that if the ownership of the home is less than three years, you can take the bite and avoid the closing costs of the mortgage refinance. Closing costs are an average of2% to 3% of the loan amount. Those borrowers who aim to live in their home for a longer period of time can refinance their mortgage loan to a fixed rate. As of now as we know the variable rates are lower than the fixed rates which are already in their historic lows, which prevents them from taking the decision to refinance their home loan or mortgage.
Should I Refinance My Mortgage?
By: Arunraj V.S.
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