Financial gurus? The Feds just cut the rates again - do you refinance or wait?

[Grumpy's Gal]

http://money.cnn.com/2008/01/22/news/economy/fed_rates/index.htm?cnn=yes

The feds just cut drastically. Some believe they will continue to cut........

At what point do you refinance? How long will it take for the banks to drop mortgage rates? Just curious......

 

[sahm1000]

I was listening to the Today show yesterday and they said that interest rates (for morgages) are at their lowest since the summer of 2005. Their advice was to go ahead and refinance if your rate was higher.

I know the Fed just announced another drop today in rates but my understanding has always been that morgage rates drop/raise ahead of Fed announcements. The question is whether they will drop them further later on. I would also think since the housing market has slowed down the mortgage brokers might be getting a little hungry for some business and will possibly be getting even more competitive in the near future.

I hope this is the case since we are doing some home improvements and looking to refinance in the next month or so!

 

[AnnaS]

We refinanced many, many years ago so things/formula might have changed now. If I remember correctly, we were told that if the current rate was 2% lower that your mortgate rate to refinance.

 

[disneysteve]

I think it usually takes a month or two for the mortgage rates to catch up with the lower fed rates, so I'd wait if I could.

 

[ICF]

We refinanced many, many years ago so things/formula might have changed now. If I remember correctly, we were told that if the current rate was 2% lower that your mortgate rate to refinance.

We did it about 5 years ago and was told it should be at least 1% lower. We're @ 5.375% now, so I doubt that we will refi again.

 

[Toby'sFriend]

I think it depends on what type of mortgage you are refinancing from.
If you have an ARM and you can refi into a decent Fixed rate, I'd get out while the getting is tolerable within the next month or so in that situation.

If you are just looking to lower the rate on a fixed loan, I think usually you need at least a .5% to 1% drop from your current rate to justify the standard closing costs.

You also need to look at your remaining term vs what you are refinancing into. For instance, we've paid 8 years on a 30 year loan. We really wouldn't want to reset that to a new 30 years --- so we'll be looking at 15 year loan rates.

 

[disneysteve]

You also need to look at your remaining term vs what you are refinancing into. For instance, we've paid 8 years on a 30 year loan. We really wouldn't want to reset that to a new 30 years --- so we'll be looking at 15 year loan rates.

This is our situation. We are 5 years into a 25-year loan, so I'm looking at 15 also. We could pay off our house and our home equity loan and still have a lower payment and shorten the term by 5 years.

 

[madge]

deleted

 

[suzydisney971]

Our mortgage broker just told me that she can get me a rate 1% lower than our current rate and reduce our loan to 30 years (we have a 40 year fixed loan). We bought the house in October 2007 (so have only paid 3 months into the loan). We would end up saving 10 years and $50 each month. But our closing costs would be almost $2000. So we aren't sure if we should wait or refi now. We would like to refi but coming up with an extra $2000 right now is a bit tight, not to mention with our luck the rates may come down even more. We are trying to put more money into our savings to use if need be when I'm on maternity leave in August. Our mortgage is our only outstanding debt. We also want to do some remodeling in April. So we aren't sure what to do. It's our first house so we are very inexperienced to all this financial stuff. WWYD?

 

[scottygirl]

30 year fixed mortage rates are not tied to the fed funds rate. Here is a good article for you to read. HTH. http://finance.yahoo.com/loans/article/104264/Fed-Cut-What-It-Means-for-Your-Mortgage

 

[tinaluis]

Our mortgage broker just told me that she can get me a rate 1% lower than our current rate and reduce our loan to 30 years (we have a 40 year fixed loan). We bought the house in October 2007 (so have only paid 3 months into the loan). We would end up saving 10 years and $50 each month. But our closing costs would be almost $2000. So we aren't sure if we should wait or refi now. We would like to refi but coming up with an extra $2000 right now is a bit tight, not to mention with our luck the rates may come down even more. We are trying to put more money into our savings to use if need be when I'm on maternity leave in August. Our mortgage is our only outstanding debt. We also want to do some remodeling in April. So we aren't sure what to do. It's our first house so we are very inexperienced to all this financial stuff. WWYD?

Contact your existing mortgage holder (not your broker) to see if they will do a no closing cost refi to keep your business. I've done that 2x with Wells Fargo and both times my out of pocket costs were very minimal.

 

[suzydisney971]

Thanks. That did help. We have Wells Fargo too. My husband is home tomorrow, I'll have him call. Thanks alot. Just still wondering if we should refi or should we wait it out another month or so in case mortgages drop even lower. Not sure if we should take the chance now or wait. Anyone in the same predicament?

 

[Banana magic]

We are in the process of refinance right now. We decided to take advantage of the 5.0 rate on a 15 year since we currently have a 4.875 rate on an adjustable that is due to adjust in 3 years. We locked in, then rate went to 4.875 the next day, so we relocked and are just going with that. We figured the rate is the same as we have now, but for a fixed 15 year instead of an adjustable. It did go down to 4.75, but now it is back to the 4.875 again. We were just debating if we should have waited or not in light of the latest news, but we are into it now, so we're taking what we have. Hopefully we won't kick ourselves for not waiting, but its a gamble either way.

 

[madge]

Not sure if we should take the chance now or wait. Anyone in the same predicament?

we're not in exactly the same predicament, but similar in that we are looking at refinancing. LOL. Our loan isn't set to readjust for another 2 years - we have a 7 year ARM, and planned to sell the house before the loan adjusted. Due to several circumstances and fueled by the current market, we've decided to stay in this house and make it a home. When we started discussing our options a few weeks ago, we were just going to borrow a small portion of our equity, make the improvements, and refinance the whole thing as soon as we were finished with the remodel. I'm not sure that isn't still the best thing to do ... but, I'm definitely doing my homework first!

 

[shelly3girls]

This is our situation. We are 5 years into a 25-year loan, so I'm looking at 15 also. We could pay off our house and our home equity loan and still have a lower payment and shorten the term by 5 years.

This is similar to our situation. We are 3 years into a 15 year mortgage but we have a HELOC from major renovations / addition needed to make our house even inhabitable. We can now refinance into a new 15 year combining the two saving over $300/month (and locking in the current floating rate on the HELOC). We will continue to pay the extra money and look to pay off the 15 in the same 12 we have now. Today we were quoted 4.875%. We have not decided if we will do it now or wait a little.

 

[flakypuff]

My dH is a REAL ESTATE APPRAISER. There is something that no one has mentioned and I think it may be something you should know.
Yes, rates have gone down..great...maybe not.
As the market is trying to adjust the values have also gone down.
Some may find that they want to refi only to find the value of the house has gone down not leaving enough or any equity or leaving them owing more that the house is worth.
People are floored sometimes...my dh looks like the bad guy and feels so bad but it is the value..he doesnt control that.
just last week this very thing happened.
A nice young couple wanted to refin. They bought this beautiful home with min down only 3 years ago. They bought the house for 650,000. The dh changed jobs and is making a little less. The wife is a nurse expecting her first child and wants to cut back hours. they were hoping that the refi would free up some cash...not so.
The house value is approx. 580,000. The homes around them are priced for sale in the med 5's and have been on the market for 9 months...
The bad news is not only did the cost of the home drop but they dont even qualify for the mortgage they have now so they cant refin for the same amount because the income is lower and the value is lower..scared1:
sadly the people that will benifit the most from a refin are the ones who will have a tuff time being able to do it

 

[MKCP5]

we got 6.375 last spring on our 1st home. when can you refi the 1st time? What kind of rates are refi rates? The same as traditional or lower?

 

[disneysteve]

we got 6.375 last spring on our 1st home. when can you refi the 1st time? What kind of rates are refi rates? The same as traditional or lower?

You can refi anytime as long as there is no pre-payment clause on your existing loan. Refi rates are the same as purchase rates.

 

[OhMari]

You can refi anytime as long as there is no pre-payment clause on your existing loan. Refi rates are the same as purchase rates.

A good rule of thumb, is don't refinance unless you can drop at least .5 point.

We are at 7.25. I just talked to a mortgage broker today and he can get me a 30 yr at 5.75.
a 20 at 5.86
a 15 at 5%

We were always at at 15, but my dh got laid off 5 years ago, and to ease with payments we went to 30. We are now at 25 years. We will probably drop to a 20 year loan, but we are going to wait a bit, to see if they will drop anymore. It is just the beginning.

 

[dvcgirl]

I think it usually takes a month or two for the mortgage rates to catch up with the lower fed rates, so I'd wait if I could.

Yep, and I'd wait a bit further anyway because the Fed isn't finished cutting rates. They're at 3.5% now and likely to end up somewhere between 2.5% and 3.0% before they're done.