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Still riding the refinance wave

Thirty-year mortgage rates ended June above 4 percent for the first time since October of 2011. While this might seem to signal an end to the great wave of refinancing, there may yet be a shadow wave -- homeowners who are just now getting their first chance to capture a lower mortgage rate.

Could you be one of those positioned to take advantage of this shadow wave of mortgage refinance?

In the shadow of the housing price peak

The shadow wave can trace its source to the peak in housing prices. From about 2004 to 2009, home prices nationally were above current levels. This means than many people who bought during that period have been unable to refinance because their loans were under water. That condition will change if the recent rally in home prices continues.

Won't these people have missed out on low interest rates? They may have missed the very lowest interest rates, but keep in mind that between 2004 and 2009 mortgage rates were generally between 5.5 and 6.5 percent. Even at a little over 4 percent, current mortgage rates would look attractive to people who have been locked into those mortgages.

Homeowners should stay vigilant

If an underwater mortgage loan has prevented you from refinancing up to this point, keep a sharp eye on two variables. One is the value of properties in your area. While nationwide figures show a solid rally in home prices over the past year, actual values will vary greatly from area to area. Based on comparable recent sales, make an estimate of whether your home's value has recovered to a level not just above your remaining loan value, but high enough to give you the 20 percent equity lenders are likely to demand these days.

The other variable, of course is mortgage rates. If your home value rises sufficiently before mortgage rates move much higher, you may have a chance to participate in the shadow wave of mortgage refinance.

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