Homeowners should consider refinancing sooner rather than later

9/6/2013 12:06:24 PM

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Rising mortgage rates are leading to a dip in refinancing activity, according to the Federal Housing Finance Agency.

As reported by Mortgage News Daily, rates hit their highest levels since August recently, with 30-year fixed-rate mortgages averaging 4.625 percent. This has led some current homeowners to refrain from taking out new loans in an attempt to lower their monthly mortgage bills.

The FHFA reported that one of the more popular refinancing vehicles, the Home Affordable Refinance Program, saw volume fall slightly during the second quarter of 2013 when compared to the two previous quarters. However, the FHFA also reported that despite this drop, HARP activity is on par with the same quarter last year.

During the second quarter of 2013, 279,933 refinances were completed through HARP. That brings the total number of HARP refinances completed since the program's inception close to 3 million.

Still, just as many homebuyers take out mortgages when rates begin to rise, many homeowners will likely focus on completing a refinance before interest rates go any higher. For current homeowners hoping to lower their monthly mortgage payments, the smart choice seems to be refinancing sooner rather than later. While rates are on the rise, they are still historically low, allowing for significant savings over time.

"Borrowers' refinance characteristics remained fairly consistent with the previous quarter," Frank Nothaft, vice president and chief economist at Freddie Mac, said in reference to the second quarter. "The cash-out amount, while increasing, continues to remain low by historical standards. And with mortgage rates still near their historic lows, over 30 percent of refinancing borrowers chose to shorten their loan term."

According to data from Freddie Mac, homeowners who refinanced their mortgages during the second quarter of 2013 will save approximately $6 billion over the next year.

However, trying to predict which way mortgage rates will go is a dangerous game for homeowners, making it prudent to invest in financing before rates go any higher.

Taking advantage of special programs
While HARP may be popular among many homeowners looking to refinance, eligible veterans have even more options.

For instance, the VA Streamline Refinance, also known as the Interest Rate Reduction Refinance Loan, can be a very attractive option thanks to its ease of use. For homeowners who already used a VA home loan to make their original purchase, the process is simple, requiring no Certificate of Eligibility, credit check or appraisal.

Also, veterans who take advantage of this program can roll the costs into the loan itself, meaning no out-of-pocket expenses.

In order to qualify, homeowners must: be current on their mortgages (with only one 30-day late payment within the last year), be lowering their monthly payment, occupy the property they're refinancing and have purchased the property with a VA home loan.

Additionally, while the VA Streamline Refinance loan does not provide cash, the VA Cash-Out refinance loan does, giving homeowners yet another option.

Contact The Federal Savings Bank to explore mortgage refinancing options for eligible veterans.