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Why You Should Refinance Right Now

Chances are, if you didn’t already take advantage of the low mortgage rates we’ve been seeing over the last few years, you may very well have missed your opportunity.  Mortgage experts say the days of 3.55% financing are likely gone, as inflation and the Fed force rates to hike.

Lucky for you, you might still have a moment left to refinance and take advantage of the rates that are still considered historically low. Keep reading to find out why you should refinance right now, and click this link to read the full article.

“It’s the last call for procrastinators,” says Jonathan Smoke, chief economist of realtor.com®.
Even though rates have already begun inching up, there are several reasons it’s smart to refinance your home now. And we mean now!

Reason No. 1: Rates are still climbing

“Economists and lenders have been warning of increasing rates for the past five years,” says Bruce Ailion, Realtor® and attorney for Re/Max Town and Country in Atlanta. “After being wrong for most of that time, the climate is now right for a period of increasing interest rates.”

The proof is in the numbers: In August, interest rates on 30-year mortgages tanked at 3.55%. Today, the rate is slightly above 4% and climbing; Smoke predicts we’ll reach 4.5% in 2017, and some experts predict rates could even hit 6% by 2019.

Conventional wisdom says you should refinance when you’re paying 1% or more than the current market rate. If that describes you right now, it’s time to get refinancing (before rates inch back up to where they were when you originally took out your mortgage—or higher!). By locking in a lower rate, you’ll bring down your monthly expenses—in some cases by hundreds of dollars, according to the National Association of Realtors®.

“With rates reaching levels we haven’t seen since early 2014, anyone who refinanced since then is not likely to be able to lower their rates,” Smoke says. “But for those who just didn’t get around to it or possibly weren’t in a position to qualify for a refinance, there is still time to lock in historically attractive rates.”

Reason No. 2: Rising home prices mean rising home values…

Rising interest rates can spur buyers who were previously sitting on the sideline into action. If these would-be buyers all rush into the market at once, you’ll see inventory tighten and prices rise. This increases the value of your home—which is good news if you’re considering refinancing. Here’s why:

  • You’ll have more options (and get better terms) for a house with a high appraised value and a low mortgage balance—it’s a low-risk loan for a bank to recoup its loss in the event you default on the loan.

  • If you’ve built up your equity to more than 20% of the value of your home, you may be able to drop the private mortgage insurance you had to purchase with your original loan. PMI typically costs up to 1% of your loan each year; on a $100,000 loan, that puts an additional $100 a month in your pocket.

  • Finally, with higher home values, you’ll have the option for a cash-out refinance—where you’ll get a brand-new loan and a check for some of the property’s equity.

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