Home prices in the U.S. rose 12.2% year over year in May 2013 according to CoreLogic (www.corelogic.com), which provides data on the real estate markets, and they were up 2.6% from April to May. Home prices rose in all but two states in May.
At the same time that home prices are soaring, interest rates are on the rise, with the average 30-year fixed rate mortgage currently now well over 4%, according to Bankrate.com (www.bankrate.com/mortgage)
Given these trends, some homeowners may think that it is too late to take action to save money on some of the largest home-related expenses. That is not necessarily so. In fact, even with home prices and interest rates up, there are still plenty of money-saving opportunities that could save homeowners hundreds or even thousands of dollars.
It is not too late to refinance a mortgage. Sure, mortgage rates have risen somewhat, but they remain low historically. Depending on a homeowner’s situation, there are several possibilities to lower monthly payments by refinancing. For example, refinancing might make sense for:
A homeowner who expects to be in his home indefinitely and who still has a mortgage with an interest rate well above what is available in today’s market. Although a rule of thumb once was that for a refinance to make financial sense, it needed to result in at least a one percentage point reduction in the mortgage rate, in fact, depending on the upfront cost of the refinance, the reduction in monthly payment, and how long the homeowner expects to own the home, even a lesser reduction could be a big money-saver over time.
A homeowner who doesn’t expect to own his home more than five to seven years and can lower his rate by refinancing to a five-year or seven-year adjustable rate mortgage (ARM).
A homeowner who believes that interest rates are likely to continue to go up and, therefore, who wants to refinance an ARM to a fixed rate loan.
If a homeowner did not get the value of his home lowered for tax purposes after the real estate bubble burst and, therefore, still is paying taxes on an assessment that is well above the current market, the rebound in real estate values should be a wake-up call that now is the time to take action. Even though real estate prices are up, in many (if not most) markets, they are still well below their peaks, so for many homeowners, the opportunities to lower property taxes as a result of a reassessment could be substantial.