Whether to RefinanceIf one refinances
The New York Times writes in its The Upshot that anyone with a mortgages purchased before mid-2011 or between the end of 2013 and early 2014 could start saving cash by re-financing.
However, the opportunity to substitute a hypothecary taken out just 12 months ago emphasizes a predicament that many borrower are not aware of. And if these funding options come up quite often, should you do it as soon as it pays off, or should you just sit back and think that interest has bottomed out?
Finally, funding is not free of charge. Funding only makes good business if you have the loans long enough for the lower month's pay to compensate for the commission. The accumulation of charges from several funding sessions means that you have to stay close for longer. Had you funded a year ago and thought it would take three years to reach break-even, you would have two years left.
Today's funding could reach break-even in a few years and add more extra liquidity to the break-even cycle. Remain in the home for many years and re-financing probably makes sence. In the ideal case, you would only refinance once. At this point, the point of re-financing amounts to a wager on what the interest will do.
When you think that they will drop another half point or more next year or so, it might be worth waiting until they do. In November 2012, interest levels dropped to a historical low of around 3.3%. Should this happen again, it might be worth refinancing a 3.8% or 3.9% borrowing today.
In the last 40 years, interest rate levels have seldom been below 5% and have exceeded 7% for much of the year. Today's low interest levels are largely the product of global financial uncertainties that are pushing investor confidence in US debt. Strong momentum is pushing the price of debt up and key interest is falling.