The rule of thumb has always been if you can obtain an interest rate 2 percent lower than your existing one, then you should refinance.
That was then, this is now.
If you can save yourself $50 per month, and the cost of the refinance pays for itself in 24 months and you plan to stay put for that long; go for it.
There have been many changes in the approval processes of both buying and refinancing. What you may have been able to qualify for when you purchased your home may not be true today. The Internet is not the place to do your mortgage. While it is a good source for information and education, the process is usually not consumer friendly. Internet lenders don’t have a vested interest in making sure you are getting into the best loan.
Don’t assume your existing lender is going to give you a “better” deal, or make the process easier because they have all of your information and payment history. When you refinance your loan, not matter who does it, you have to apply all over again, and yes, that usually means obtaining a new appraisal, title insurance, and re-documenting your income and payment history.
We are seeing an unbelievable “perfect storm” for refinancing. Beware though: when it comes to mortgage rates, sometimes it’s better to “act now”… and no, that isn’t just salesmanship, it’s the difference between a rate in the 4 percent range and the 5 percent (or even 6 percent) range. Granted, all of these rates are historically low, but why settle for a 6-percenter when you can possible get a 4-percenter, even for an Alaska FHA or VA loan.
Earlier this month, mortgage rates plummeted to their lowest levels in four years. Now, I love when mortgage hacks are right for the wrong reasons, don’t you? Many have pontificated that it was because the FED lowered that pesky FED Funds Rate. But if you have been a reader for any length of time you know more than they do because you know that long-term mortgage bonds frequently move in the opposite direction as the FED decisions. It happened because the Fed said it would “employ all available tools” to resuscitate the US economy.
The next day, however, the markets had second thoughts.
After the sugar-high of this statement, the markets began considering the long-term implications of a near-zero percent Fed Funds Rate and the cumulative cost of government intervention to-date. Suddenly traders grew afraid that government action would devalue the dollar and lead to inflation - the enemy of low mortgage rates.
As a result, that nice dip in rates didn’t last … again. By the end of the day, mortgage rates were higher by as much as a 0.5 percent and nearly all of the day’s big gains were erased and Alaska Home Loan rates went right back up to where they had been.
In hindsight, the reversal the next day wasn’t all that surprising - it’s the same trading pattern we’ve seen twice already this year.
The first time was after the Fed’s “surprise” rate cut in January
The second time was after the federal takeover of Fannie Mae and Freddie Mac in September.
Sharp rate drops tend to be followed by immediate bounce-backs, it seems.
What can be learned from this? Get your ducks lined up if you intend on wanting to be able to pounce the next time Alaska mortgage rates fall. I had a boatload of people call but wanted to think about it. I don’t fault a person for wanting to ponder things a bit before making a decision - I do it. Unfortunately the marketplace could care less and those that hesitate pay more. While those that locked at the first opportunity to save money are sitting pretty today, the rest that “waited for rates to go lower” are likely kicking themselves about it.
Does this mean you missed it? Yes and no.
Get your paperwork in order, and call to schedule an appointment for your refinance. By doing so you will be ready to take advantage of that target rate you want the next time it spikes lower.
Going forward, mortgage rates may fall, or they may not, but we’ve now seen the pattern three times now. When mortgage rates plunge like they did, they rarely stay that low for long. Sleeping on it for even one night may end up costing you dearly.
Jackie Toppin is affiliated with Preferred Mortgage in Anchorage, and has been in the mortgage industry since 1977. She may be reached at (907) 261-7655 or www.jackietoppin.com.
