How long to wait before I can refinance?
Jacqueline W asked:
I just locked-in a rate of 5.99% for a new home. If interest rates fall to an all time low, how long must I have a loan before I can refinance? I realize that 5.99% is alreay pretty low (considering the rates were increasing this week), but what if they continue to fall?
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I just locked-in a rate of 5.99% for a new home. If interest rates fall to an all time low, how long must I have a loan before I can refinance? I realize that 5.99% is alreay pretty low (considering the rates were increasing this week), but what if they continue to fall?
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They won’t fall for much longer.
And historically, 5.99% is extremely low.
My mom & dad paid 18% for a government loan, in 1978
I paid 12% in 1987 and then 10% in ’90
Husband & I paid 5.58% in ’04 when they were giving money away.
Just stick to this for a while and pay more than your minimum.
Get out from under all debt, things are only going to get worse.
Good luck
Rule of thumb is that you shouldn’t refinance if you don’t drop your rate by 1%. That’s a very good rate.
Couple of things you need to consider is
(1) how much you would pay for a new loan?
(2) how long to save the amount you pay for (1)?
If you plan to stay in your house for longer than (2), then you can consider refinancing.
Finally, before you refi., make sure you don’t have a pre-payment penalty
5.99% is a great rate. Assuming it is a fixed rate even if the rate drops another 1/8 of a point or so prior to you closing it is not going to drastically increase savings for you and it is not going to make much of a difference in your monthly payment depending on your amortization (i.e 30 years, 15 years etc.) Additionally,the national average home owner moves every 3 years so it will not necessarily impact you long term if rates do drop. Depending on your equity position, you could potentially refinance within 6 months, however the cost of obtaining new financing (generally around 3% of your loan amount) will be incurred every time you refinance and you will likely not see a benefit of refinancing even if rates do continue to drop as the cost of obtaining the new loan will likely exceed your savings in a rate/term refinance. Overall, at 5.99% I wouldn’t concern yourself too much with “what if”.
The bigger picture is how much is it going to cost you to refinance. A refinance is going to cost you thousands of dollars. Your interest rate is going to have to be historical to make this work for you. Don’t get sucked into the “no closing costs” refinance, if you don’t pay closing costs up front, you are paying somewhere else.
I wouldn’t concern myself if I were you. Enjoy your great rate.