 Finding the best time to refinance
|
 Dear
Dr. Don,
Is there a good time of the year to refinance? In other words, do
interest rates go down during the summer and up in winter? Are there
yearly trends to consider when refinancing?
-- Joseph Judicious
 Dear
Joseph,
Refinancing takes a back seat to financing a home purchase, because
delaying a refinance is a lot easier than postponing the closing
on the sale of a home. With a sale, there are more parties involved
and higher costs involved with a delay. So avoiding the summer relocation
season can keep your refinancing deal on the lender's front burner.
Lulls in the mortgage market can spell opportunity
as lenders offer closing-cost concessions to get loans in the door,
but getting the best interest rate you can qualify for will trump
a few hundred dollars in concessions every time. Often, the reason
there's a lull in the mortgage market isn't because of the season
but because rates have headed higher, so waiting for a lull means
the rate ship has sailed.
Changes in interest rates are more cyclical than seasonal,
so you want to be more aware of the market trends than choosing
when to refinance based on the season of the year. The type of mortgage
you're considering is also important. Changes in interest rates
for fixed-rate loans follow changes in the 10-year U.S. Treasury
note, while changes in adjustable-rate mortgages, or ARMs, follow
changes in short-term interest rates, most importantly by changes
in the targeted federal funds rate.
Short-term mortgage rates have been trending higher
because the Federal Reserve Board's Open Market Committee has raised
the targeted fed funds rate by one-quarter of a percentage point
14 times since June of 2004. Now that's a trend! In contrast, the
10-year Treasury note has been relatively range-bound, along with
long-term mortgage rates, although the trend here also points to
higher fixed-rate loans.
To ask a question of Dr. Don, go
to the "Ask the Experts"
page, and select one of these topics: "financing a home,"
"saving & investing" or "money."
|
