Mortgage rates are on the rise . Quick! Buy a house or refinance before they get any higher! Granted, people do not have to panic and make a snap decision just because rates are on the rise. However, when I look at the housing market over the last couple of years, it does make me happy that I decided to refinance my house last year. I didn't refinance at the very bottom of the market, but I certainly did well. Should people jump into the market now before rates skyrocket?
Extremely low rates
Why did I refinance last year? By the numbers I was able to shave a few years off my mortgage and lower my payment. When you have owned a home for a few years, you know how much rates can change. To put it into perspective, my first mortgage was a 30-year mortgage at a rate of 6.75%. Compare that to today's rates . At the time, we thought that was pretty good, but now years later we realize how much the market can change.
Moving on up
When I chose to refinance, I knew that rates could have gone lower. However, I had refinanced in the past, so I knew that rates could also be a lot higher. You can question financial decisions like this all day, but in the end you need to make a decision and move forward. This is why buying or refinancing a house is such a big deal. My situation worked out, but I also know people who bought a few years ago, are now "underwater" and can't refinance at all.
For those that are thinking about refinancing, I would offer this advice:
1. You are never going to know for sure that this is the best time to refinance. Rates can fluctuate by the day, so if you are waiting for them to hit the bottom, you may never know when that day is. If you are able to discern that information, there are plenty of experts who would like to talk to you.
2. Crunch the numbers for various scenarios. While the market and news outlets make a big deal of rate changes, the reality is that the difference in your 30-year mortgage may not be that noticeable over the long term. Certainly every fraction of a percentage point up or down will represent money, but there are plenty of mortgage calculators online that can help you with the math.
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