Should you consider refinancing despite the fact that rates have gone up?
- Refinancing can be a smart financial decision if it reduces borrowing costs.
- If you can get a lower rate or have an adjustable rate mortgage, now may still be a good time to refinance.
Demand for mortgage refinance loans has plunged in recent months, and there’s a simple reason for that. You see, the demand for refinancing is more affected by changes in interest rates than the demand for new mortgages. This is because the current owners rarely have to have to refinance – whereas most people buying a home need a mortgage to do so. And rates have risen rapidly for refinance loans in 2022, especially from record highs in 2021 when the pandemic raged.
But, despite the fact that refinance rates have increased, refinancing is still a smart move in certain circumstances. Here are three situations where you might want to consider getting a new home loan, even though you won’t be able to do so at last year’s low rates.
1. If you can still get a lower rate than what you are currently paying
Refinancing would still make sense even if rates are up if the rate you would pay for your new loan is lower than what you are paying now.
For many people, there is still room to lower their rates by refinancing, even though national average rates are much higher than they were in 2021. That’s because – although rates have rebounded from recent record lows – they are still well below historical averages.
If you have an older loan that you haven’t refinanced recently, it’s worth checking to see if a loan you might be eligible for now could reduce your financing costs.
2. If your financial situation has improved
You may also get a lower rate if your financial situation has improved since you took out your original loan. For example, if you had a lower credit score or a lot of debt at the time of your loan, you may have had to pay a fairly high rate, even though you borrowed at a favorable time. So, if your situation has since improved, you may qualify for a lower rate now.
Since many lenders provide refinance quotes at no cost and without a credit check, it may be worth reviewing rates, especially if you borrowed a long time ago or your financial situation has improved.
3. If you’re worried your rate will adjust soon
Another situation where refinancing might make sense, despite rising rates, is if you currently have an adjustable rate mortgage (ARM). ARMs have a locked-in rate for a limited time, but eventually they start moving with a financial index, which means your rate could go up.
Since most experts believe rates will continue to rise for some time, this may be your last chance to switch to a fixed rate loan and lock in current rates before mortgages get even worse. more expensive.
The bottom line is that raising rates doesn’t mean refinancing should be ruled out for everyone. Consider your personal situation and see what rates you might qualify for now. Then compare them to what you’re currently paying to decide if getting a new home loan is a good financial decision for you.
A Historic Opportunity to Save Potentially Thousands of Dollars on Your Mortgage
Chances are interest rates won’t stay at multi-decade lows much longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger on buying a new home.
Ascent’s in-house mortgage expert recommends this company find a low rate – and in fact, he’s used them himself to refi (twice!). Click here to learn more and see your rate. While this does not influence our product opinions, we do receive compensation from partners whose offers appear here. We are by your side, always. See The Ascent’s full announcer disclosure here.