Low mortgage rates: Time to refinance home at record low rates

Low mortgage rates have reached a new record: 4.69 percent. It's a great time to refinance homes.

Melanie Stetson Freeman/The Christian Science Monitor / File
Low mortgage rates convinced Natick, Mass., Realtor Beth Byrne to refinance the mortgage on her own home in this 2009 photo. At the time, her 4.875 percent rate was considered quite good. Now, mortgage rates are even lower.

Mortgage rates are at their lowest level since at least the Nixon administration and, quite possibly, the Eisenhower years. So, is it time to refinance?

Absolutely, say mortgage experts.

The national average rate for a 30-year mortgage stands at 4.69 percent this week, mortgage-guarantor Freddie Mac reported Thursday. That's the lowest level since the organization began tracking mortgages in 1971.

Rates for 15-year fixed-rate and five-year adjustable-rate mortgages also fell to record lows of 4.13 percent and 3.84 percent, respectively.

"Even those who are upside down are not out of the game completely," thanks to the federal government's Home Affordable Refinance Program, which allows under-water homeowners to refinance if they are current on their mortgage payments, says Greg McBride, a senior financial analyst at Bankrate.com.

The company, an online aggregator of information on financial products, issued its own report showing low mortgage rates that, it said, probably are the lowest since mid-1956.

The old rule that refinancing wasn't worthwhile unless interest rates dropped 2 percentage points is outdated, he adds. "If you can cut 1/2 to 3/4 percentage point, it's worth looking at."

Of course, much depends on on individual circumstances. Homeowners typically have to pay out a few thousands dollars to refinance, so they'll have to stay in their home long enough to recoup that cost through lower mortgage payments.

Check bank fees, too -- not just the points being charged, but also the fees charged for the application, appraisal, and so on.

Sometimes, the savings aren't obvious. Mortgageholders who have a variable-rate mortgage may want to lock in a low rate, even if it saves no money, in order to lock in a low payment.

Or a homeowner eight years into a 30-year mortgage may find it's profitable to refinance into a 15-year mortgage, which offers an even lower rate (currently 4.13 percent). That way, they shave off interest costs and shorten the number of years before they've paid off their home, Mr. McBride says.

"It's important that consumers shop around, not just on the basis of the interest rate," he adds.

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