Refinancing is usually discussed as a . In some cases,
though, it is more like a race against time.
In particular, two characteristics of recent years have made
refinancing a race against the clock. First, some of the lowest
mortgage rates in history have made refinancing especially
attractive. Second, a combination of financial difficulties and a
depressed housing market have prevented many homeowners from
taking advantage of that opportunity.
Therefore, the question is whether rates will stay low long
enough for more homeowners to get in a position to refinance.
Here some ways you can win this race:
Know your refinancing target.
Through mid-2014, average monthly interest rates on 30-year
mortgage loans had been below 4.5 percent for nearly three
years. Previously, they had never been that low before, and
they have averaged 8.5 percent historically. The point is,
there is no telling how much longer low mortgage rates will
last, or how fast they will rise when they start to move. If
you are still trying to get in a position to refinance, you
should at least so you will know how much of a
cushion you have left.
Keep your credit healthy.
Healthy credit is often a prerequisite for refinancing. If you
have been waiting for housing prices to rebound so you can
refinance, make sure you keep your credit healthy in the
meantime. If you have credit issues, identify what they are and
start taking steps to address them. In that case, the race is
one of getting your credit rating to rise before mortgage rates
Divert resources toward building equity.
Housing prices have been recovering, but according to
the , the average home is still 17 to 18 percent below its
peak value. This means that many homeowners are still waiting
for their mortgage loans to get above water so they can
refinance. Rather than assume low mortgage rates will wait
around while that happens, why not speed things up by putting
whatever resources you can muster into paying down your
existing mortgage to rebuild equity?
Follow the local real estate market.
This means tracking both price activity in your neighborhood
and mortgage lenders in your area. Real estate prices are
highly localized, so you won't know how well your home's price
is recovering unless you look at recent sales of comparable
properties. As for lenders, following who consistently offers
the best rates will help you save time when you are ready to
start getting .
Understand your time frame.
The race is not over once you refinance. At that point, you
will have a new mortgage and the clock starts all over again.
Thinking about when you want to have that mortgage paid off
relative to your situation in life will help you choose the
right length for your new loan.
Looking at refinancing simply as a comparison between two
rates is a bit like looking at a still picture of a 100-yard
dash. The reality of both the foot race and the refinancing race
is that things are moving too fast to be captured by a single
snapshot. Neither time nor mortgage rates stand still, so you
need to keep moving to stay in the race.
originally appeared on shoprate.com.
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