Determining The Right Time To Refinance
REM #A764
By Ilyce R. Glink
Summary: A ThinkGlink reader has a 5 year fixed rate mortgage that is about to expire. Ilyce explains his options and encourages all borrowers to start the process months in advance.
Q: I bought a house almost two years ago. I used a special first-time buyer’s
program which fixed the interest rate of the loan at 5.5 percent for 5 years.
After that, the loan adjusts to a one-year adjustable rate mortgage (ARM).
Can I refinance the loan after 5 years and get a fixed-rate loan again?
A: You should be able to refinance your loan after the 5-year fixed-rate period
expires. But I'd start the process about 4 to 5 months ahead of when your rate
expires. Ideally, you'll want to keep that rate until the very last month until
it ends, and then close on your new loan.
The only exception to this would be if interest rates drop down again to below
6 percent. Right now, a 30-year fixed rate loan is about 6.7 percent. That's
still low, historically speaking, but not as low as they were a couple of years
ago.
If interest rates do dip below 6 percent for a 30-year fixed rate mortgage,
I'd consider refinancing at that time. While the interest rate may not be quite
as low as your 5.5 percent rate, it will be a fixed rate at a very attractive
rate.
So, keep an eye out on what happens in the world of mortgages and interest
rates over the next few years.
NOTE: This column is distributed by Real Estate Matters Syndicate, PO Box 366, Glencoe, Illinois, 60022. This column may not be resold, reprinted, resyndicated or redistributed without written permission from the publisher.
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