rate2By now you’ve heard the news…mortgage rates are on the rise. The average 30-year mortgage rate hovered at nearly 4.5 percent. That upward trend (from 3.5 to 4.5%) will likely continue over the coming weeks and months.

The news has left many prospective homebuyers and refinancers worried — are they too late?

“Everyone has been waiting for the bottom and sitting on the sidelines,” says Steven Alexander. “But no one knows how far the bottom is until we have passed it.” Alexander, who is president of Private Mortgage Services and has 25 years experience with metro area mortgages, says all isn’t lost.rate4

“Rates don’t go up vertically and come down vertically. In the coming weeks and months, there will be dips back down,” he says. At the same time, catching a dip need not be a goal. “You are in a historically low interest rate environment since the 1920’s. You may not get the 50 year low, but you can get the 47 year low.”

So, yes, there is still time to buy a home or refinance a mortgage at low-ish rates and you can take comfort in knowing that most property values have nowhere to go but up. Here are some things to consider before you make a mortgage move:

Prepare2Have a steady source of income. “You need to feel comfortable that you have a job that is going to continue,” Alexander says. But also know that to refinance your home, you no longer need to have two years of steady employment (unless you are self-employed).

Don’t let the past stand in your way. If you tried to refinance and were denied, try again, he says. Now that many foreclosures and short sales have filtered through the system, homes that didn’t appraise six months ago may appraise now, giving you the equity needed to refinance.

Follow the 1 percent rule. If you know you’re going to be in your home for a long time and you can do it at minimal cost, go ahead and refinance to get a 1 percent savings on your mortgage rate, says Alexander.

Get the right mortgage for you. A 10-year fixed rate mortgage is great, if you can manage it, but over-committing to an aggressive payoff strategy will hurt your cash-flow…and as the saying goes, you can’t eat bricks.

Run the numbers. Josh Moffitt, founder and president of Atlanta-based Silverton Mortgage Specialists, says people are often too quick to refinance. If you’re only a few years into a long-term fixed mortgage, you may or may not save by refinancing. A break-even calculation can help: Take the number of months left on the loan times the payment compared to the number of months on the new loan times that payment. Consider how you might use any savings to improve your financial situation such as paying off high-interest loans or investing in home improvements to increase the value of your home.

Once you have a new mortgage or have refinanced your existing mortgage, keep these tips in mind:

Pay off or reduce non-tax deductible debt before mortgage debt. Mortgage interest, Alexander says, is still tax-deductible.Change3 Getting rid of it entirely may not be your smartest financial move. Pay off higher interest debts first if you can and put a freeze on any additional debt until you have it under control.

how5Prioritize investments. Making sure you are contributing to your 401K or IRA, for example, is as important as trying to payoff your mortgage early. Don’t shortchange your future by focusing solely on getting rid of your mortgage or worse, using retirement funds for a payoff.

Make extra payments when possible. Once you have a mortgage, reduce your interest payments by making one extra payment on Dec. 31 or Jan. 1. You’ll save on interest and could pay off the mortgage in less than 21 years.

From Nedra Rhone

Leave a Reply

%d bloggers like this: