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2006: A look back - A look ahead  
  Mortgage rates and home prices rose in 2006 while a refi boom is anticipated in 2007.
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FAQs on mortgage strategies for 2007

Because everyone's situation is unique, it's impossible to give general guidelines for mortgage strategies in 2007, but maybe some answers will help you in deciding your next mortgage move.

Here are some commonly asked questions that may help you decide which mortgage products to get and when:
Mortgage strategies
1. What's going to happen to rates in 2007?
2. Should I refinance in 2007?
3. When should I refinance?
4. Should I wait before I buy a house?

1. What's going to happen to mortgage rates in 2007?
Economists predict that long-term rates will rise in 2007. They made a similar prediction about 2006 and were only partially right: Rates rose in the first half of the year, then fell steeply over the next three months, then leveled off for a while.

The fact is no one can predict the movement of interest rates accurately. It's relatively safe to predict that rates will rise in 2007, but no one knows how far they will rise and whether it will be slow and steady through the year, or if most of the increase will take place in just a few months, with rates being relatively flat the rest of the year.

And the pundits could be wrong -- rates could actually fall in 2007.     

2. Should I refinance in 2007?
The answer to that depends on many factors. If you want to refinance strictly to get a lower interest rate, you're probably better off doing it sooner rather than later because most observers expect rates to rise through the year.

There are other reasons to refinance. Some people refinance to get rid of mortgage insurance. Others do it to pay off their high-rate home equity lines of credit and consolidate all that debt into one mortgage loan. Still others look at refinancing as a way to escape rising interest rates on adjustable-rate mortgages, particularly on interest-only and pay option ARMs.

If you decide to refinance for one of the above reasons, discuss it with a trusted loan officer or mortgage broker to make sure you have all the facts you need. You might find, for example, that it costs more in the long run (but less in the short run) to consolidate all your debt into one mortgage.

3. When should I refinance?
Refinance your mortgage when you're ready to do it. In other words, if it makes financial sense to refinance at a certain time, go ahead and do it. Don't wait for rates to fall further. You can't know if you grabbed the rock-bottom rate until after the fact, so don't even try.

When it comes to mortgages, getting a good rate is good enough. The world won't end if you don't get the absolute best rate.

4. Should I wait before I buy a house?
Waiting for home prices to hit bottom is just like waiting for interest rates to reach their nadir. You can't count on timing the market correctly. When you find the right house at an acceptable price, go ahead and get it. If house values in the neighborhood fall after that, well, you didn't buy the house just to sell it a few months later, right? The house is almost assured of appreciating over the next few years, even if its value falls for a while at first.

-- Posted: Nov. 1, 2006
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