Is it a Good Time to Refinance a Mortgage Right Now?
Reader Question: I keep hearing that it’s a good time to refinance a mortgage loan right now. But I also hear that a lot of homeowners are having trouble refinancing right now. How can it be both ways? I’m confused by this.
It can be confusing, so let me try to clear some things up for you. Yes, it is a good time to refinance a home loan … if you’re qualified to do so.
I just saw yesterday that the interest rates on a 30-year fixed-rate mortgage loan dropped below 6% over the last few days. That’s a really good interest rate, and it’s the lowest since February of this year.
Why does this make it a good time for refinancing a home loan? Well, if you are paying a much higher interest rate than the 6% prime rate, and you can qualify for a refinance loan with a rate that low, you could stand to save a lot of money over the life of the new mortgage.
Of course, you would have to run the numbers first, to see if the money you save would exceed the money you would spend in closing costs. But you get the idea. That’s why you’ve been hearing it’s a good time for mortgage refinancing right now.
Now for the other side of your question.
The reason you hear that some homeowners are unable to refinance their homes — the biggest reason, at least — is that a lot of people are “under water” with their mortgages right now. This means they owe more than their homes are worth, which makes refinancing nearly impossible. This is especially the case in cities were home values had been skyrocketing over the last few years (think California and Florida), followed by a sharp decline in values.
So while it sounds confusing and conflicting, it’s true. It is a good time to refinance a mortgage loan right now … if you’re a qualified candidate. But many homeowners are unable to get a refi loan right now, due to their property values.
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