As rates dip, will refinance activity begin to climb?
Posted on Monday, October 20, 2014 at 8:39:21 AM
According to Freddie Mac, residential financing rates have dropped below 4 percent to new lows for 2014. While this trend can certainly lead to more interest in mortgages, it could also contribute to another type of activity: refinancing.
Analysts with the financial services firm Stern Agee told clients in a note that the lower mortgage rates could contribute to a boom in refinance activity, HousingWire reported. The lower rates make it tempting for homeowners to reassess their finances and make a move to secure more favorable terms before figures start to climb.
However, refinancing isn't without its pros and cons. The Washington Post explained that most refinancing is done when borrowers can cut their interest rate by at least a half a percentage point. But, other elements come into play, such as outstanding balances and long-term plans.
For example, you should be wary of refinancing if you could move in the next few months to a year. You might also have problems refinancing should you lack the needed equity in your property. While home prices have been on the way up, not everyone has the value to pull off a successful refinancing deal.
With that said, think about your options before you make any significant switch with your residential financing.