Refinancing is usually discussed as a . In some cases, though, it is more like a race against time.
In particular, two characteristics of recent years have made refinancing a race against the clock. First, some of the lowest mortgage rates in history have made refinancing especially attractive. Second, a combination of financial difficulties and a depressed housing market have prevented many homeowners from taking advantage of that opportunity.
Therefore, the question is whether rates will stay low long enough for more homeowners to get in a position to refinance. Here some ways you can win this race:
- Know your refinancing target. Through mid-2014, average monthly interest rates on 30-year mortgage loans had been below 4.5 percent for nearly three years. Previously, they had never been that low before, and they have averaged 8.5 percent historically. The point is, there is no telling how much longer low mortgage rates will last, or how fast they will rise when they start to move. If you are still trying to get in a position to refinance, you should at least so you will know how much of a cushion you have left.
- Keep your credit healthy. Healthy credit is often a prerequisite for refinancing. If you have been waiting for housing prices to rebound so you can refinance, make sure you keep your credit healthy in the meantime. If you have credit issues, identify what they are and start taking steps to address them. In that case, the race is one of getting your credit rating to rise before mortgage rates do.
- Divert resources toward building equity. Housing prices have been recovering, but according to the , the average home is still 17 to 18 percent below its peak value. This means that many homeowners are still waiting for their mortgage loans to get above water so they can refinance. Rather than assume low mortgage rates will wait around while that happens, why not speed things up by putting whatever resources you can muster into paying down your existing mortgage to rebuild equity?
- Follow the local real estate market. This means tracking both price activity in your neighborhood and mortgage lenders in your area. Real estate prices are highly localized, so you won't know how well your home's price is recovering unless you look at recent sales of comparable properties. As for lenders, following who consistently offers the best rates will help you save time when you are ready to start getting .
- Understand your time frame. The race is not over once you refinance. At that point, you will have a new mortgage and the clock starts all over again. Thinking about when you want to have that mortgage paid off relative to your situation in life will help you choose the right length for your new loan.
Looking at refinancing simply as a comparison between two rates is a bit like looking at a still picture of a 100-yard dash. The reality of both the foot race and the refinancing race is that things are moving too fast to be captured by a single snapshot. Neither time nor mortgage rates stand still, so you need to keep moving to stay in the race.
This articleoriginally appeared on shoprate.com.
Bank of America + Apple? This device makes it possible.
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out , and some early viewers are claiming its destined to change everything from banking to health care. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here !
You may also enjoy these insurance-related articles:
- 4 ways to maximize your refinancing savings
- Refinancing: Doing the time warp
- 5 reasons to think ahead about refinancing
The article 5 Steps to Winning the Refinance Race originally appeared on Fool.com.
Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
