According to Yahoo Finance, the refinancing boom could be coming to an end sooner rather than later. So why is this warning different than what you may have heard or read previously? See the reasons below from Yahoo Finance.
There are new signs the Federal Reserve will soon raise the interest rate it charges banks and that, in turn, is likely to push up home-loan rates. The Federal Reserve has waited to let the economy grow stronger and held off after Britain’s “Brexit” vote (the decision to leave the European Union) to help buffer the United States from any ripples of economic instability.
New signs of an imminent Fed rate hike include:
- The Fed chief speaks. In August, Federal Reserve chief Janet Yellen said in a speech, “I believe the case for an increase in the federal funds rate has strengthened in recent months.” Watchers of the economy take that to mean a hike in the federal funds rate.
- The election soon will be over. CNN writes that the Fed probably is waiting to act on rates until after the Nov. 8 presidential election.
- The economy is growing. The U.S. economy is stronger and may no longer need propping up. Growth has been minuscule all year — just a 1.1 percent annual rate estimated for this year’s second quarter — but several economic experts are predicting that a routine government report due out in late October will show growth has accelerated to 3 percent, The Wall Street Journal reports. More conservative analysts predict a 2.6-percent rise — still a healthy improvement. The divide between the richest and poorest Americans still is huge, but things are improving. As The New York Times writes, the country last year enjoyed the “largest economic gains in nearly a generation,” citing:
* Fewer people are in poverty.
* Record numbers of Americans are covered by health insurance.
* Incomes grew at all income levels.
5 Reasons to Refinance
1. Lower your monthly payment
A lower monthly mortgage payment is always welcome. Refinancing to a lower interest rate should drop your payment, although the details depend on your loan amount, your credit score and other factors.
2. Get rid of your mortgage insurance
If you bought your home with a down payment smaller than 20 percent of the purchase amount, you probably were required to buy mortgage insurance. (It protects your home’s lenders and investors, not you). It’s expensive. Private mortgage insurance (PMI) charged on conventional loans, costs 0.5 percent to 1 percent of your loan’s value. Federal Housing Administration mortgages include mortgage insurance, too. You have to compare the loans you’re offered and their entire cost to tell which is the better deal. Your lender can help you do this.
PMI adds $41.50 to $83 a month to your payment for every $100,000 of your mortgage. With FHA mortgages and some conventional loans, you have to pay mortgage insurance for the life of the loan; refinancing is the only way out.
However if you have 20 percent equity in your home when you refinance — whether through your payments or from appreciation of your home’s value — you won’t need mortgage insurance.
Check with your lender to see if your payments have exceeded 20 percent of the loan value.
3. Extract cash
Home values are rising. That means you may have more home equity. One way to tap it without selling the home is to refinance and take out cash. (You could, instead, get a home-equity loan, a line of credit or a reverse mortgage.)
4. Pay off your home faster
Rates are so low now that, depending on the interest rate you qualify for and your current monthly payment, refinancing into a 10-, 15- or 20-year mortgage could increase your payment only a little yet save you tens of thousands of dollars in the long run by allowing you to pay off your mortgage quicker.
5. Lower your mortgage insurance payment
Even if you can’t totally get rid of PMI, you might lower your monthly cost since the Federal Housing Administration last year dropped the rate on annual mortgage insurance premiums from 1.35 percent to 0.85 percent.
The White House, in announcing the cuts last year, estimated that they would mean an average savings of $900 a year for homeowners who refinance and for first-time homebuyers. But the rate cuts are effective only on newer loans so you must refinance to get a lower rate. (HUD answers questions about the rate cuts.)
The information above provided from Why You Should Look at Refinancing Your Home Now.
To speak to our Mortgage Department regarding refinancing, call 405-685-6200 ext 660 or email firstname.lastname@example.org.
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