Homeowners who thought about refinancing last winter and never got around to it are in luck. Mortgage interest rates are lower now than they were at this time in 1992 or 1991.
As of mid-January, you could get a 30-year fixed-rate mortgage at 8.13 percent on average around the nation, according to HSH Associates, which does a weekly mortgage survey. That compares with 8.5 percent a year ago and 9.83 percent in January 1991.
More Top Picks Best 4 Wheel Atvs
Rates on 15-year mortgages were even better-7.6 percent, compared with 8.1 percent in mid-January 1992 and 9.48 in 1991. One-year adjustables averaged 5.2 percent this January, compared with 5.8 percent a year ago and 7.74 percent in 1991.
Although mortgage rates may rise slightly in coming weeks, market analysts expect inflation to remain low, which generally keeps interest rates low as well.
If you have a mortgage of 9 percent or higher, it probably would be worthwhile to consider refinancing. For some families, the low rates present a good opportunity to take equity out of the house, perhaps to pay college tuition or remodel a room. Or, you might want to roll a home equity line of credit into a first mortgage.
For example, say you have a fixed-rate, 30-year mortgage of $90,000 with a 10 percent interest rate and a house valued at $160,000. Your current monthly mortgage payments for principal and interest are about $790. You could:
– Refinance that amount at 8.1 percent interest, which would reduce your payments to $668 a month.
– Take $25,000 cash out of the equity you have in the house, increasing the mortgage to $115,000. At 8.1 percent interest, the monthly payments would be $854, just $65 a month more than you’re paying now.
– Cut your mortgage term to 15 years. Monthly payments on a $90,000 mortgage at 7.6 percent interest for 15 years would be $840, about the same as the payments on $115,000 for 30 years.
– Fold a line of credit into a first mortgage, which would give you stable payments but probably would not reduce your monthly costs. Most equity lines have variable rates that could rise in the future but for now are at an attractive 7 percent to 7.5 percent. And unlike a first mortgage, equity lines give you financial flexibility – monthly payments rise and fall according to the balance outstanding and on some lines you have the option of paying interest only.