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Should I refinance now? |
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Interest rates have fallen and mortgage rates are at an historic low. The average 30-year mortgage rate has recently been below 6.00% - the lowest in 35 years. Many homeowners should consider it, especially if your rate is currently 7.0% or higher, or you have an adjustable rate or your credit rating has improved. |
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Q
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Why aren't mortgage rates falling faster? |
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Fact is, the Fed’s aggressive rate cuts have little to do with home loans, which tend to track trends in the trading of bonds and swaps. The short answer is that the Fed cut its two key short-term rates -- rates that apply to transactions of very short duration and do not influence mortgage rates. On the other hand, mortgage rates are influenced by the yields on long-term bonds, which are securities that won't be redeemed for a number of years. |
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Q
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What is better, fixed or adjustable? |
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Depending on your needs--We can go over your options with you. Currently, the gap between a 30-year-fixed and a one-year-ARM is currently very slim. However, interest only payment ARMs have great appeal for those not concerned with long term principle reduction, or flexibility with the required minimum payment. We can examine several products with detailed information on each to learn the strengths and weaknesses of each, then decide the best one for you. |
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Should I look at a 15-year or 30-year mortgage? |
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15-year fixed rates are running right now about 1/2 percent below the equivalent 30-year rate. You could find yourself below six percent comfortably. It may not necessarily cost you much more payment.. We can complete a comparison of the two for you. |
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Does it pay to pay points and buy your rate down even more? |
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We all often talk about the fact that if rates fall low, it’s worth considering buying down the rate even more. It may be worth doing, given that each additional point buys your rate down approximately a 1/4 percent. If you could have 6.0% on a 30-year fixed, you might decide to buy it down to 5.5 %. The breakeven to recoop your initial investment will be about 5 years on a 30-year term. You have to ask yourself: Will you be in the house long enough to get the money back? |
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Are there other things I have to think about rather than just refinancing? |
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A home equity line of credit. Rates on home equity lines of credit, are typically a variable rate. Once you are approved, you then can draw monies as you need them. There are several reasons to choose a Home Equity Line of Credit and not refinance your present first mortgage: consolidate credit card debt, home improvements, education, purchase a new car, or as an emergency fund. Particularly with layoffs in the news, getting approved for a home equity line now - while you still have a job - is a smart move. Then you can draw on the money if you need it in the future for any reason. |
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When should I lock in a rate? |
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We’re probably not in an environment in which rates are volatile - but if you find a great deal, you ought to go ahead and lock. Rates are no longer expected to go significantly lower, so locking is usually recommended at the start of the processing. |
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