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Could it be time to refinance again?

In my last post I discussed how wrong the so-called ‘experts’ have been in predicting interest rates. I had pointed out how surprising it was that the 10-year Treasury bond had slipped to 2.95% while many of the ‘experts’ thought the yield would have been above 4% by the middle part of this year. Well, here we are less than one month since my last post and the yield on the 10-year Treasury now stands at an incredible 2.71%!

When I had refinanced my own mortgage 18 months ago (and had recommended to clients that they also consider a refinance) I certainly would not have thought that I’d be considering this again for as long as I am in my house. Well, here we are in August of 2010 and I’m refinancing again!

So, here are my thoughts about whether or not you should consider a refinance (assuming you have a mortgage of course): if the interest rate on your mortgage is over 6% you should definitely be making some calls to your current mortgage holder to explore options. If you are between 5-6% you should also be thinking about a possible refinance now. When the big wave of refinancing occurred in early 2009 there was a very small delta between the 30-year fixed rates and the 15-year fixed rates. Today though, the 15-year fixed rates are remarkably low. In my case the rate stands at 4.00% with zero points and it may very well be a bit lower by later today or tomorrow morning. So let’ say you have a 30-year mortgage with a rate above 5%. If you can refinance into a 15-year mortgage at 4% (or maybe even lower) you may be able to get yourself into a much shorter mortgage with little change in your monthly payment. (The size of your mortgage will determine this of course.) Either way, if you are currently over 5% it is worth a call or two to explore your options. And always keep in mind closing costs: just because interest rates are lower it does not always mean you should refinance. You need to run the math to make sure you will recoup those costs over time.

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