Although interest rates are currently fairly low, it’s possible for rates to rise in the months or years ahead. If you might refinance an existing mortgage in 2017, it’s particularly important to pay attention to interest rates and to other trends in the housing and mortgage market.
Understanding the Refinancing Process
When you decide to refinance your mortgage, you take out a new loan to pay off your current mortgage. The process of refinancing is very much like the process of taking out a mortgage initially. You’ll usually need to show that you have enough income to pay the debt and that you have a good credit score. The value of your home compared to what you want to borrow is important, too. It helps to shop around. That way, you’re more likely to get the best rate and to pay as little as possible out of pocket.
People decide to refinance their mortgage for a few reasons: to save money, pay less each month or get extra cash. Some people take out a bigger loan and use the extra cash to pay for home improvements or other expenses. You might refinance to extend the term of your mortgage and pay less each month or shorten it, so that you pay more each month.
Keep an Eye on Interest Rates
One of the biggest changes in the mortgage and refinancing industry expected in 2017 is an increase in interest rates. As Reuters notes, that jump in interest is expected to lead to a drop off in refinancing. If you are considering refinancing your mortgage, you might get a better interest rate if you do it sooner, rather than later.
Consider All Your Options
Although a new president will take office in January 2017, one of the programs put into place under the last president, the Home Affordable Refinance Program (HARP), will remain available through September 2017. Created after the housing crisis, HARP allows people who have negative equity in their homes (i.e. they owe more than the home is worth) to refinance.
According to the Federal Housing Finance Agency, HARP has helped more than 3 million homeowners and around 300,000 homeowners remain eligible for the program. Once HARP is over in September 2017, it will be replaced by a similar program that is also targeted at people who have high loan to value ratios.
If the idea of paying closing costs has kept you from refinancing in the past, it might be worth considering a no closing cost loan in 2017. With a no closing cost loan, you agree to a slightly higher interest rate in exchange for the lender paying the closing costs upfront. No cost closing loans may be an option if you want to get a better interest rate but don’t have enough cash on hand to cover the closing costs.