It seems like everywhere you turn, you’re hearing about rising mortgage rates and the unfortunate news that it’s too late to lower your bills with the snap of your fingers. And with interest rates having risen approximately 1.5% in the past two months, it’s hard to argue with reality.
However, just because you didn’t jump on the opportunity earlier this year doesn’t mean you can’t still benefit. There are situations where refinancing still makes sense. Check out these options and start enjoying the savings everyone else is talking about.
Fight the Increase: Turn an Adjustable into a Fixed. If you’re paying an adjustable rate loan, you’re likely feeling the pressure of rising rates. You might want to consider locking into a fixed rate to avoid further increases. If your initial lock term has expired or is about to expire, your monthly payments could begin to rise the year the rate adjusts.
Just because it’s Adjustable Doesn’t Mean You Can’t Get a Better Adjustable. If your initial lock term has expired or is about to expire, and you want to get the lowest possible rate, you may want to consider a new adjustable loan that can give you a lock for a period of 5 to 10 years. This will provide you protection while maintaining the low adjustable interest-rate.
Go Short: Change a 30 year into 15 to Lock in Savings. 30 years may have seemed like a long time when you signed the loan 10 years ago but think about it, you’re basically holding a 15 year mortgage. Why pay the higher rate if you’re not getting the benefit of 30 years anymore? Take a look, you may find out a new 15 year mortgage will lower your payments and cut out years from your remaining payments.
Keep it fluid: Go from Fixed to Adjustable. If you know you’re moving from your house in the next 8 to 10 years there may be a benefit to changing from a fixed loan to a 10 year adjustable which will give you rate protection for 10 years. The adjustable loan rate is set for the initial period of time. And if you’re confident you don’t need additional protection you may benefit from the lower interest rate.
Money Might Not Buy Love but it’s Always Nice to Have Some Extra Cash. Are your expenses building out of control? Or do you just want to lower your payments? If so, it might make sense to start a new 30 year mortgage to lower your monthly payments. Even if the rate is the same, the longer time means your dollar payment will actually be lower which could help provide the extra money you need around the house. We do note that this approach requires careful consideration because although you are lowering your monthly payment, you are adding years to the loan.
Take it to the Bank: Find out what promotions your bank is willing to offer. Many banks have promotions that can reduce rates as well. There are deposit relationship discounts, Harp promotions etc. Don’t be afraid to ask.
Many banks even offer protection if rates drop, letting you lower your rate if rates drop. This is for those people who don’t want to move because you think rates are going back down.
If you recently refinanced your 30 year mortgage at 3.5% you’re likely never going to refinance that mortgage. However, if any of the above apply or you think you have a different situation that may benefit from refinancing, contact your bank and explore the opportunity.
David Siegel is a Home Lending Specialist with Citibank in its Englewood office. Siegel can be reached at david.siegel_citi.com
By David Siegel
