Avoid trying to time the market to get the absolute lowest interest rate. Most people wait too long and end up paying a higher rate than they should. If you’re going to refinance, find a low fixed rate, lock it in, and get it done!
Irvine, CA (PRWEB) June 15, 2013
Mortgage rates are on their way up. As reported by Morgan Brennan on Forbes, interest rates climbed for the fifth consecutive week during the first week in June, and are now 18% higher than the record low rates set in November of 2012.
According to Wertz & Co., an Orange County accounting firm, the steady increase suggests that now might be a good time for homeowners to refinance in order to lock in a low rate.
“It wasn’t too long ago that a mortgage rate in the high single digits was a great deal,” said Russell Wertz, CEO of Wertz & Co. “But rates plummeted to historic lows after the recession and have stayed low for a long time, mainly due to the U.S. Treasury printing money at an unsustainable pace and flooding the market with liquidity. This cycle is coming to an end, which means mortgage rates will inevitably go up.”
Despite the recent increases, today’s mortgage rates still offer excellent deals, especially for homeowners who purchased or refinanced more than five to seven years ago. Wertz believes that now is a good time to refinance as long as homeowners meet the following conditions:
- They plan on owning the property for at least another four years. It typically takes at least that long to recoup the refinancing costs and make it worth the time and effort to refinance.
- They avoid “teaser” adjustable interest rates that start out very low but increase over time. With higher interest rates on the way, the better strategy is to lock in the best fixed rate that is currently available.
- They don’t use the refinance to pull equity (cash) out of the deal. There are some exceptions to this rule, depending on the type of property and the owner’s personal situation. However, the greatest single asset for most homeowners is the equity in their homes, which results from debt reduction and inflation. Homeowners often get in trouble by refinancing to get “free” money from their equity and then experiencing short- to medium-term drops in home values.
“If you’re within four years of paying off the remaining balance, I would not recommend refinancing,” added Wertz. “Also, avoid trying to time the market to get the absolute lowest interest rate. Most people wait too long and end up paying a higher rate than they should. If you’re going to refinance, find a low fixed rate, lock it in, and get it done!”
About Wertz & Company
Wertz & Company is an Orange County accounting firm that specializes in working with entrepreneurs and business owners along their journey to success. The firm offers accounting, financial planning, estate and wealth management planning, tax preparation, and other management consulting services in a personal, proactive, responsive manner. With a strong commitment to the local community, Wertz & Company contributes to several different charitable endeavors. For more information, visit http://www.wertzco.com.