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Mortgage Refinance Rates Continue to Fall

The other day, I wrote about current mortgage refinance rates. Guess what? In the time since I wrote that articles, rates have continue to fall. In fact, Zillow showed average rates of as low as 4.71% for 30 year fixed rate mortgages as this morning (it’s frequently updated, so your results may vary), and Bankrate is reporting an overnight average of 5.08% for 30 year mortgages. Either way, it’s clear that mortgage rates are very, very low right now.

Of course, if you’re trying to decide when to refinance, then the key question is whether or not they’ll head even lower. Since I don’t have a crystal ball for this sort of thing, I have to rely on things like Bankrate’s Rate Trend Index, which currently states that “Rates are likely to head lower” over the next 30-45 days. Just keep in mind that the RTI is far from foolproof, as it’s simply a summary of the opinions of a panel of experts.

My advice is that, if you’re thinking about refinancing, get a ballpark estimate of how much it’ll cost you to do so. With that in hand, you can estimate your “Payback Period” (i.e., how long it will take to recoup your closing costs). If the payback period is too long (or if you don’t plan on staying in your house for very long), then it doesn’t make sense to refinance no matter how enticing the rates seem to be. But if the payback period makes sense, then go for it. Just try not to look back with regret if rates dip further after you pull the trigger.

Posted by on January 13, 2009.

Categories: Mortgages

6 Responses

  1. I just locked in 4.5% for 15 years at a local credit union. No points and closing costs were only $2,100. Gotta love the good ole Credit Union!! Although I’m going from 7% for 30 years to 4.5% for 15 years, my principle and interest payment only goes up $42. But I don’t have to pay PMI and I’m knocking 7 years off the loan (I’ve been in the house 8 years). Not too shabby of a deal. They also had 10 years at 4.5%, which is exactly $300 more a month for me. We decided for more flexibility, but will probably end up paying the extra $300 to pay off the house even sooner.

    by Anonymous on Jan 13, 2009 at 3:39 pm

  2. I got a 30 year quote at 5%, but ended up only saving around $150 a month. With closing costs I’d have to stay in the house for 5 years to break even. Just not in line with my life plans. For those that can knock of years and keep the same payment or just slightly higher are in great shape.

    by Anonymous on Jan 14, 2009 at 12:25 am

  3. thomas: Are you sure you did your math right? That works out to closing costs of $9000. Seems awfully high.

    by Nickel on Jan 14, 2009 at 12:34 am

  4. We’re in the middle of refinancing from a 6.5% rate to a 5% rate on our 30 year fixed. The payback period to pay back the closing costs? 13 months. I’ll take it!

    We’ll be saving a ton of money in the long run, and we’ll be here for at least another 3-4 years, if not longer.

    Now we’re just crossing our fingers on the appraisal. Time to say a prayer!

    by Anonymous on Jan 14, 2009 at 11:12 am

  5. Our mortgage is currently at 5% for two more years and I’m thinking about a refi soon as these current rates are tempting. I live in California so a 15 year mortgage would add thousands to my monthly payment, not a few hundred. I think we’ll go with the 30 year fixed and make a 13th payment when possible.

    by Anonymous on Jan 15, 2009 at 6:11 pm

  6. My fiancee and I are patiently waiting for mortgage rates to drop before we lock in. We are closing on our first home on July 15th. About a month ago our banker could’ve offered us 5% on a FHA loan. Last week it was closer to 6%. Today he offered us a 30 day lock at 5.5%. Do we lock in now, or wait for rates to hopefully fall a bit closer to that 5% mark? Need advice!!

    by Anonymous on Jun 15, 2009 at 1:21 pm

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Hello and welcome. I’m “nickel”, and I’m the guy who runs this place. I’m a thirty-something family man with a loving wife and four wonderful kids. I’ve been sharing my thoughts on various topics related to money and finance here on FiveCentNickel since May 1, 2005. While my wife and I have always been pretty […]more →