Despite the incredible boom in mortgage refinancing that’s occurred over the last few years in light of historically low rates and home values returning to some sense of normalcy, we still get questions from from clients, their families and friends who have held off on determining if the opportunity makes sense for them.
Many have forecasted that 2014 will mark the end of the great mortgage refinancing boom. Rates have started to climb as the economy continues to improve and the Federal Reserve begins to ease off their Quantitative Easing program.
Rates might not be your only refinancing hurdle in 2014. Created as a response to the 2008 financial crisis, the Consumer Financial Protection Bureau will begin to enforce regulations put in place to help avoid a repeat. While cutting out some of the more exotic loan options, longer terms and other riskier products will likely be a benefit to long term economic stability, it’s not just lenders that will be impacted by the regulation.
The changes dictate that lenders go to greater lengths to prove a loan applicant is a good candidate to repay their debt. Verifying income, assets, debt levels and credit scores make for sounder loans, but also increase the already mountainous amount of documentation and time involved for the consumer in the process. As banks move to meet these requirements, those seeking to buy a home or refinance existing debt will likely face delays.
All of this said, it’s still not too late. Rates are still low by historic standards. Most recently in Cincinnati, 30 year fixed rate mortgages have been hovering around the 4.5% range after falling as low as 3.25% the last several years. While we never forecast where markets are headed, if you stand to gain from refinancing, whether by reducing your interest burden, speeding up the payoff or to payoff other, higher interest debt, the long term benefit may far outweigh the short term headache.
Rates can fluctuate quickly and lenders price loans differently. A great place to start to get a sense of where rates are in your area is Bankrate.com which can identify trends and rates in your area.
As with any financial matter, you don’t have to do it alone. Picking the right lender, analyzing the impact of closing costs, calculating out of pocket expenses and other issues are all things we can help clients work through as part of our planning services. If you have any questions or know someone who might, please let us know.
Have a great week!