Who should refinance at 6% rates? Five examples (Podcast)
Who should refinance at 6% rates? Five examples (Podcast)
Abstract
Should you ever refinance when rates are rising? It's no secret that mortgage rates are on the rise. "With interest rates on the rise, now is likely not an ideal time to refinance for many homeowners," Simental says. Lower your interest rate The biggest reason to refinance would be to reduce your interest costs. "If rates have dropped since you purchased, you can do a rate-and-term refinance and just get a lower rate and payment," Simental says. "Generally, it's best if you can lower your interest rate by 0.5 to 0.75 percentage points - so from a 6% to a 5.5% or 5.25% rate." Even when rates hit 5%, there were still over a million borrowers who could lower their rates and save money with a refinance. Consolidate higher-interest debts Refinances can also make for good debt consolidation options since mortgages typically carry lower interest rates than other financial products, like credit cards and personal loans, for example. "What you would do is refinance and get it into a fixed 15-, 20-, or 30-year mortgage, and you don't have to worry about that rate adjusting." Fixed rates are higher now than they were over the past two years.