Refinance, If You Can
Rates may be tantalizing, but be prepared to jump through many hoops.
Refinance your mortgage now and you may capture the lowest interest rate of your lifetime. But unlike a couple of years ago, when it seemed all you needed was a pay stub (if that) and an eager mortgage broker, today’s process can be tedious. That’s because the demand for refinancing is high, standards are stricter, and the number of people processing mortgages is down. Here’s what you should know before you refinance.
What’s the outlook for rates?
Expect the 30-year fixed rate to hover near 5% for the balance of this year or, if the economy improves a tad, to creep up to 5.25%, says Keith Gumbinger, of financial publisher HSH Associates. HSH’s survey of lenders pegged the national average 30-year fixed rate at 4.97% the week ending May 1. The average 15-year fixed rate was 4.68% and the average 5/1 adjustable-rate mortgage (which has a rate that’s fixed for five years, then changes every year after) was 4.91%.
Given that the spread is so narrow between a 30-year fixed-rate loan and a 5/1 ARM, and that rates are at historically low levels, it makes no sense to take out an ARM now.
Rates will rise when inflation heats up, but that’s not an immediate risk. Kiplinger’s forecasts that the rate of inflation will stay steady for at least the next couple of months.
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