Contributed by: Kali Hassinger, CFP®, CDFA®
Long-term interest rates and thus mortgage rates have hit historical lows this month. This has been a continuing trend with mortgage interest rates hitting historical lows eight times in the last five months. This is partially due to the Fed’s aggressive purchasing of mortgage-backed securities since March.
If you’re like many, you may be wondering if this is the right time to refinance. Although there are many benefits to refinancing, it’s important to be sure it’s appropriate given your current situation.
Here are some items to consider if you’re thinking of taking advantage of these once again, historically low mortgage rates:
How long do you plan on staying in your home? There is a cost to refinancing. To justify the fees, you should be planning to stay in your home for at least another two to three years.
What is more important to you: lowering your monthly payment or lowering the amount you pay over the life of the loan? Reducing the term of the loan, even if it means the payment will slightly increase, can significantly reduce the total interest paid!
If you have an outstanding second mortgage or home equity line of credit, consider combining them into one loan with a fixed interest rate.
If you have an adjustable-rate mortgage (ARM), now is a great time to move to a fixed rate to avoid payment fluctuations in the future.
Consider a modest cash-out refinance to pay down high interest rate loans or debt.
As with any major financial decision, such as a refinancing or a new home purchase, we encourage all of our clients to reach out to us before making a final decision. Please don’t hesitate to reach out if you’d like to talk through your options and see if changing your mortgage rate or term aligns with your overall financial plan and goals.
Kali Hassinger, CFP®, CDFA®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.
Raymond James Financial Services and your Raymond James Financial Advisors do not solicit or offer residential mortgage products and are unable to accept any residential mortgage loan applications or to offer or negotiate terms of any such loan. You will be referred to a qualified Raymond James Bank employee for your residential mortgage lending needs.