MoneyRates.com 2011 resolution #7: Look into refinancing your mortgage

July 05, 2011

| MoneyRates.com Senior Financial Analyst, CFA

The nature of a resolution is to prompt yourself to do something you know is right, but that for one reason or another you haven't been able to do up to this point. July's monthly resolution, which is to look into refinancing your mortgage, could be a prime example.

Current mortgage rates are below 5 percent, which is extremely low. Then again, mortgage rates have been low for a couple of years now. So, anyone who hasn't refinanced yet is either a procrastinator, or has been prevented from doing so by circumstances. This is why a resolution to take a fresh look at refinancing may be timely.

Current mortgage rates in context

Current mortgage rates represent the rising pessimism about the economy. A weak economy is often associated with lower interest rates. This has pushed mortgage rates back well below 5 percent.

Since first falling under 5 percent in early 2009, mortgage rates have risen above that level a few times - including as recently as this February - only to slip back down again. However, considering that before 2009, 30-year mortgage rates had never dipped below 5 percent, one of these times when they climb back above 5 percent they could stay there for years to come.

In other words, current mortgage rates represent an extremely rare opportunity that you can't expect to wait around forever.

Overcoming obstacles

If mortgage rates have been low for a couple years now and some people haven't refinanced yet, there must be some obstacle in the way. If you applied a year or two ago and were turned down for credit reasons, try again - perhaps your credit rating has improved sufficiently. Similarly, if your mortgage was under water, check again - even if your local real estate market hasn't improved, a year or two more of mortgage payments may have brought your principal in line with the value of your house.

On the other hand, if you've just been procrastinating, try this. Run a mortgage calculator to see how much you would save by refinancing. Chances are, the answer will be enough to get you up off the couch.

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