According to Bankrate.com, the average interest rate on a 30-year, fixed-rate mortgage is around 5%. Thus, mortgage rates are around all-time lows. If you are paying a higher interest rate on your mortgage, consider refinancing. Typically, it makes sense to refi if you can drop your rate by one percentage point while smaller reductions in your rate also may be worthwhile.
Today’s low fixed interest rates make it extremely attractive to refinance an adjustable rate loan, converting to a fixed 15- or 30-year mortgage. Even if your current adjustable payment is lower than a fixed rate payment, you’re locking in future obligations. If you stick with your adjustable loan, you may find yourself paying more when interest rates rise. The monthly payment on an adjustable rate loan can quickly move higher than a fixed payment.
What’s more, this might be a good time to refinance and take out a fixed 15-year loan. Bankrate.com puts the average 15-year fixed loan rate at about 4.5%. Cutting your interest rate and accelerating repayment can save hundreds of thousands of dollars over the life of a loan, perhaps with a modest increase in your monthly payment.
