Unhappy with your mortgage rate? When you're paying a higher rate than you'd like, it's important to remember that a mortgage rate isn't a life sentence—there's always the possibility of refinancing to get a lower rate that could help you realize huge savings. Homeowners with a mortgage rate in the five percent range who refinance now could see their monthly payments drop by as much as ten percent. However, when it comes to refinancing, timing is everything. To save the most money, you need to refinance when you can get the best possible rates.
Average mortgage rates vary from state to state, but, right now, the national average stands at 4.58%. While this is still historically low, it's higher than it's been in the last five years. The average rate has been steadily creeping upwards since last August, only recently taking a slight dip.
Time is Running Out On HARP
The Home Affordable Refinance Program (HARP) is set to expire this year, which means that, if you're underwater on your home, and have a loan owned by Freddie Mac or Fannie Mae, you're probably going to want to refinance through HARP, while you still can. With HARP, you can refinance a home in which you have little or no equity, to get a more affordable mortgage, without having to purchase new or additional mortgage insurance. Despite the government's efforts to raise public awareness, the HARP program has seen low rates of participation lately, even as the deadline to take advantage of it rapidly approaches.
Many homeowners seem to be unaware of the program or don't realize that they would qualify for it. There's no minimum credit score required for HARP, so if you want to refinance but are worried that you won't be able to find a lender willing to work with you, this is a program you'll definitely want to look into, before the end of the year.
Consider the Full Range of Refinancing Options
Homeowners whose credit scores aren't high enough for conventional loans can also look into refinancing through the Federal Housing Administration, who offer loans at competitive interest rates. However, you are required to pay mortgage insurance premiums. The Department of Veterans Affairs also offers loans at low-interest rates for those who qualify, and, like HARP, they don't require you to buy mortgage insurance. On the other side of the coin, if you have a higher income now than you did when you got your original loan, you might want to consider refinancing to a shorter-term loan that can save you even more on interest payments.
There's No Guarantee Rates Will Stay This Low
There are plenty of experts out there who can offer reasonable forecasts, but there's no way to predict whether interest rates will rise or fall with perfect accuracy. The best way to determine whether it's a good time to refinance is to compare the rate you're currently paying with the rate you could qualify for today. Right now, mortgage rates are still relatively low, making the middle of 2018 a great time to refinance, if you're not already getting a great interest rate on your home loan. While you do have to factor in things like closing costs—to determine if a savings of a few fractions of a percent off your interest rate will be worth it—if there's a significant gap between your existing rate and the current average, it might be smart to make a move now. Consult a professional soon, regarding refinancing options, rather than rolling the dice and taking a chance on interest rates falling even lower.