Mortgage Rate Looking Good – Below 6% Now

WASHINGTON (Associated Press)
Rising worries about a weak economy pushed rates on 30-year mortgages below the 6 percent mark for only the second time in more than two years.

Freddie Mac reported this week that 30-year, fixed-rate mortgages averaged 5.87 percent this week, down from 6.07 percent last week.

The following types of mortgages also showed declines this week:

* Rates on 15-year mortgages dropped to 5.43 percent, down from 5.68 percent last week.
* Rates on five-year adjustable-rate mortgages (ARMs) declined to 5.63 percent, compared with 5.78 percent last week.
* Rates on one-year ARMs fell to 5.37 percent, down from 5.47 percent last week.

Posted by Steve
8 years ago
Steve

Steve is a Real Estate Blogger, Husband and Dad, UT Austin Grad, Runner, Real Estate Broker and owner of Crossland Team and Crossland Real Estate in Austin TX.

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arz - 8 years ago

Steve, can you give me an idea of how to research on refinancing our mortgage? We purchased our home about 1.5 years ago and we got 6.25% 30 year fixed. On what ground we should consider refinancing to reduce our cost?

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Steve - 8 years ago

Hi arz,

I just look at the breakeven point and decide if it makes sense. The old rule of thumb was if you could reduce the interest rate by 1%, it would probably make sense. I’d first check with your current lender to see what the costs would be for a refinance. Then I’d compare it to at least 2 other lenders. Many will offer “no cost” refinance, but it’s really built into a higher interest rate than you would otherwise receive.

But back to the breakever point, using simple numbers for a hypothetical, if you paid $1200 to refinance the loan, and your payment dropped $100/mo, you’d break even in 12 months and be ahead from there forward from strictly a cash flow point of view. If your breakeven is more then 2 years out, you want to make sure you’ll be in the house that long.

Finally, and this doesn’t apply to you, but it may others, if you have a seasoned loan, let’s say 10 years into a 30 year note, refinancing may lower your payment but you’re now 10 years further away from payoff. Also, at 10 years into a note, a larger portion of your payment is going toward equity than will be the case on the new loan.

I’m 7 years into a 15 year note on one property I own. About half of the payment pays down principle now. I like that. I don’t think I want to trade that note for a lower interest rate unless other factors make it a good deal. I only have 8 years left to be free and clear on the property and I don’t want to go back to a new 15 or 30 year note just to get a better interest rate.

So there are a lot of factors to think about. I hope this helps.
Steve

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