Is it time to refinance?
Literally, time will tell. Possibly as early as tomorrow mortgage rates may reflect the Federal Reserve's stunning plan to buy up to $300 billion of long-term government bonds and $750 billion in additional mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac. The national average rate on 30-year, fixed mortgages was 5.15% on Wednesday, according to financial publisher HSH Associates, up slightly from a day earlier. Rates could drop up to .50%.
Here are two ways refinance may benefit you:
As homeowner #1 - A long time home owner with a mortgage balance of $87,800 might save more than $26,800 in interest charges over the life of the loan by refinancing from 5.75% to 4.75% and reducing the loan from 30 years to 20 years. In this scenario, the monthly payment would actually increase approximately $7.40 a month while paying 2 points at closing. You would need to stay in your current home for at least 24 months in order to yield savings. That's how long it will take for the monthly interest savings to offset the closing costs attributable to refinancing.
As homeowner #2 - Using the same basis numbers of a remaining $87,800 balance with a rate reduction of 5.75% to 4.75% and paying 2 points at closing but refinancing for 30 years the monthly savings would be approximately $102. However, you would pay an additional $1,885 (approx.) in interest charges over the life of the mortgage.
Consult your financial or mortgage advisor to see how refinancing may benefit you. Compare current refinancing rates with the HSH Showcase of Lenders
With Spring just days away, homeowners may begin thinking of home improvements. if you are thing of refinancing to extract home equity to improve your home's energy efficiency you might be eligible for up to a 30% tax credit. For more information, visit EnergyStar.gov
