The average rate on a 30-year fixed-rate mortgage was 3.9% at the end of last week. That is down from 4.5% as recently as last spring, the lowest since May 2013 and far below the 5 percent-plus rates that prevailed as recently as early 2011. Rates on 15-year mortgages are even lower at just 3.1%
In other words, it may be time to consider refinancing your mortgage—especially if you secured your current mortgage in late 2014 or early 2014, or anytime before mid-2011.
When considering whether to refinance, remember you can fully repay a home mortgage whenever you want and take out a new one. So if rates rise, you can stick with your old mortgage (as long as you continue to own your home). But if rates fall, you can pay off the old mortgage and get a new one.
Everyone’s circumstances are different, but if prevailing rates are half a percentage point below the rate on your current mortgage, a refinance is potentially compelling. If it is closer to a gap of a full percentage point, it may be a no-brainer—unless you expect to move soon.
But taking out a new mortgage comes with costs, such as origination and appraisal fees — typically in the low four figures. The open question is whether you will enjoy the benefits of lower rates for long enough to cover that upfront cost.
If you are interested in learning if refinances makes sense for you, please call or email me to discuss. If I can’t answer your questions, I can certainly give you the name of a reputable mortgage broker who can.
– Hank Nicholson, CFP