Your Mortgage Refinance Opportunities May Be Quickly Going Away

It was back in mid-May that we issued a call to arms for Americans to look into refinancing their mortgages if they missed the boat in 2010.  At the time, mortgage rates were under 4.50% for a 30-year loan.  They went even lower than that.  Your chance to refinance for dirt cheap mortgages may be going away.  Rates have risen, and it is not because of the end of QE2.

Before convincing you to look into whether or not this can help you, there is one personal experience that can be shared… The difference between a 6% or higher average mortgage payment between two mortgages and having a 4.20% single mortgage is massive.

Freshly issued data from Freddie Mac and Fannie Mae show that the latest week’s mortgage ended at an average of 4.60% for 30-year mortgages or 3.75% for 15-year mortgages with an average 0.7 point on each.  We will not even discuss an ARM at the current time, even if the rates are far cheaper.  If rates continue to rise, ARMs will be less attractive.  Besides that, derivations of ARMs and the variations of interest-only and negative-amortization loan products helped to create the mortgage mess and overvalued housing prices.

The picture may in reality even be worse for those who are or were interested in refinancing.  Bankrate.com has data out today as well that is showing how volatility is imperiling mortgage stability.  It actually shows how the 30-year fixed mortgage rose to 4.79% this week, based upon an average of 0.32 discount and origination points.  This also indicates that the 15-year mortgage is up 0.04% to 3.90%.  If you have a jumbo-loan, meaning outside of the conforming parameters, that rate is now 5.27%.

Bankrate even went on to note, “This is the first time the 30-year fixed rate has risen two weeks in a row since early April. After that, the fixed rate dropped for nine weeks in a row before a slight rebound in mid-June.”

Here are two examples of why refinancing your house can save your monthly bills. One house has a mortgage balance of $300,000.00 and one house has a mortgage balance of $200,000.00.  Of course, these do not include property taxes and  does not include other insurance products.  These savings are only the difference of what you will save on your raw mortgages now.

• At 6.0%, the $300K mortgage runs $1,798.65 per month.  At 4.2%, that is $1,467.05; and at 4.7% that comes to $1,555.91.
• At 6.0%, the $200K mortgage runs $1,199.10 per month.  At 4.2%, that is $978.03; and at 4.7% that comes to $1,037.28.

Sadly, refinancing a mortgage generally helps higher balance mortgages than homes that have low mortgages balances.  It is just the law of larger numbers.  Many of the fees are the same regardless of the size of the mortgage, as are many of the closing costs.

There are obviously many other things to consider when refinancing.  Some homeowners simply cannot refinance due to real estate prices in their local area or due to their income and credit.  Still, many houses have not been refinanced out there which have higher mortgages (and maybe two mortgages) that are still eligible and whose homeowners can qualify to refinance.

If it turns out that the recent economic data proves that the April and May data was truly representative of a Japan-led soft patch, these mortgage rates will start looking closer to 5.0%.  And if (or when) the FOMC starts raising rates again, those mortgage rates might rise considerably higher yet again.

It costs virtually nothing to find out if this can help you.  Here is a graph of that 30-year mortgage trend from Bankrate.

JON C. OGG