Many homeowners are jumping at the chance to refinance as the 3o-year fixed-rate mortgage has fallen to an average of 4.6% and 15-year home loans are at 3.99%. With rates so low, here are a few things to consider if you are trying to decide whether or not to refinance.

• How long will it take to recoup any closing costs associated with refinancing? The longer you plan to stay in your home after refinancing, the better off you’ll. Have your mortgage broker run the numbers to find the break even point for refinancing.
• Do you have an adjustable-rate mortgage (ARM)? There are plenty of people out there who still have ARMs that are scheduled to reset at a higher rate at some point. Mortgage rates are low now, but think about whether or not you’ll be able to afford the monthly payments when rates start to climb again.
• Do you have enough home equity to refinance? It doesn’t matter how low mortgage rates are if you are underwater on a home loan. Unless you qualify for the government’s program to help distressed homeowners — which has had lukewarm results — it will be tough to get a mortgage lender to approve a refinance.

Even if you don’t qualify for a home refinance right now continue to make your monthly housing payments on time each month to avoid problems. Not only will you avoid foreclosure, but a as the housing market recovers you may find yourself in a better position to get approved for refinancing down the line.

No.

No, they are not.

There is nothing inherently bad about an adjustable rate mortgage — regardless what you may have seen on the evening news recently.

There are all kinds of adjustable rate mortgages: 3/1, 5/1, 7/1, 2/28 — just to name a few. And each loan product has a different use for a different person who may be in a different situation.

And generally speaking, the only time I have seen an adjustable rate mortgage be “bad” is when a homeowner gets into an adjustable rate without understanding the risks associated with the loan. Occasionally, I suppose that the 2/28 adjustables could be argued as “potentially bad” but there isn’t really anything “bad” about them for someone who understands them.

Now.

The reason I bring up the fact that there isn’t anything really bad about adjustable rate mortgages is that the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.97 percent according to the latest Freddie Mac press release, with an average 0.7 point, down from last week when it averaged 4.00 percent. A year ago, the 5-year ARM averaged 4.90 percent.

“Treasury bond and note yields declined this week, and rates on fixed-rate mortgages and hybrid ARMs followed suit,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Rates for both the 30-year and 15-year fixed-rate mortgages were the lowest in six weeks; initial rates on 5/1 hybrid ARMs hit an all-time low since they were added to the survey in the beginning of 2005.

With rates this low, are adjustable rate mortgages “bad”?

Only if you don’t know what you are getting yourself into.

If you still think that Ben Bernanke sets the mortgage rates by announcing the Fed has raised or lowered interest rates… sorry to break your heart, but it isn’t true.

But recently, the Fed has been buying mortgage bonds – between 10 and 20 billion each week — and that has helped the interest rates on mortgages stay low.

And the program that has allowed the Fed to buy mortgage bonds is coming to an end after spending somewhere around 1.2 trillion over the past year or so.

Experts generally agree that it means the mortgage bond market is going to adjust in a way that results in increased interest rates on mortgages.

Which means that you can reasonably expect mortgage rates to rise this year – although no one can tell you for sure how much they expect them to rise. Some experts say that they may rise only slightly, others say that a 2% jump is not out of the question.

According to the SF Chronicle:

Julian Hebron, branch manager at RPM Mortgage’s San Francisco office, anticipates a bump up to around 5.5 percent by summer with rate volatility all year.

“The Fed isn’t going to start dumping mortgage bonds on April 1, they’re just going to stop buying,” he said. “By that time, improving economic data is likely to push the Fed toward a rate hike bias. This will contribute to higher mortgage rates, slowing refi activity, and less mortgage bond supply. So while the Fed won’t be buying anymore, rates shouldn’t spike immediately because there will be less supply for markets to absorb.”

Christopher Thornberg, principal at Beacon Economics in Los Angeles, thinks the Fed’s withdrawal will have a radical impact.

“Clearly, when they stop printing all that money, it’s going to be a shock to the system. I have to assume that when they pull back on it, it will cause a 100- to 200-basis-points rise” to rates of 6 percent or 7 percent, he said. “When they start selling off the stuff they purchased, which by my guess would come early next year, that would cause another 100- to 150-basis-points rise.”

But it is also possible that the Fed could step in and buy even more mortgage bonds than they the $1.2 (or so) trillion that they have already bought and in his Congressional testimony released last week, Chairman Bernanke said the Fed eventually will take steps to forestall inflation that also are likely to result in higher interest rates for all loans.

So it remains to be seen exactly what the impact of the Fed discontinuing the mortgage bond buying program – but if you are planning your home financing options, you may want to remain on the safe side and expect higher rates coming soon.

“With any new Chase mortgage or refinance, choose either 1% cash back or a 1% payment against your principal balance annually when you sign up for automatic payments on a new Chase Mortgage. Getting started is easy.

Open a new Chase mortgage.

1% Mortgage Cash Back works with any new Chase mortgage or refinance.

Enroll in 1% Mortgage Cash Back and choose how you want to receive your reward:

Deposited into your Chase or WaMu checking account OR applied as a payment against your mortgage principal

Set up Automatic Mortgage Payments from your Chase or WaMu checking account.

At your loan closing, complete your enrollment in our automatic mortgage payment service with your Chase or WaMu personal checking account. With this convenient, FREE service, your monthly mortgage payment is automatically deducted from your checking account. You’ll never miss a payment, never worry about looking for a stamp.

Watch your cash back grow!

Keep an eye on your savings with each statement. And on each loan anniversary you’ll receive your reward – as a direct deposit into your checking account or applied against your mortgage principal.”

“We talked to many customers and prospects, and they really liked the idea of having their bank help them pay down their mortgage,” said David Lowman, Chief Executive Officer of Chase Home Lending, in a press release. “They also liked the option of getting the reward in cash.”

Is This A Good Deal?

Kind of, but you might be surprised to learn that many other banks are offering things such as an interest rate discount when you get your loan if you agree to use automatic withdrawls on your mortgage and a discounted interest rate may end up saving you far more than 1% cash back on your mortgage. So be careful to do the math when considering whether or not this program is for you — because it may or may not be the best thing for you.

But I have to hand it to the marketing people at Chase — they are a creative bunch.

Justin McHood is a loan officer living in the Phoenix, Arizona area. You can find Justin on Facebook, Twitter, ActiveRain or LinkedIn and he is happy to answer any mortgage-related questions that you may have.

Borrowing costs increased for all loan types last week, with the average rate on 30-year fixed-rate loans climbing to a six-week peak.

Thirty-year fixed home loan rates last week rose 0.03 percentage point to 6.16%, excluding fees, matching the rate of the Feb. 23 week, the Mortgage Bankers Association said.

The MBA said its seasonally adjusted index of mortgage applications dipped 0.4% to 646.6 last week.

The MBA’s seasonally adjusted purchase index, an indicator of home sales, rose 2.7% to 413.8 last week.

The refinancing applications index dropped for the fourth straight week, declining 4.0% to 2,015.0, its lowest level since late February.

Mortgage rates are at a six-week high but well below levels reached a year ago.

Unless the job market and the economy slump, relatively low long-term borrowing costs could help spur a housing rebound late in the year, many economists say.

Warmer spring weather typically brings buyers back to the market. This year, potential home purchasers will find a huge supply of unsold houses at prices perhaps much lower than the last time they shopped.

Any big cracks in the spring sales season could delay a housing recovery already stalled by trouble in the subprime mortgage sector. Subprime mortgage lenders have tightened standards, making it more difficult for borrowers with weak credit to get home loans.

“The spring housing season is key to the broader outlook and early indications appear weak,” according to a Bank of America report this week. Second-half economic growth “depends crucially” on home sales in the second quarter, the firm said.

Lighter shopper traffic than expected, downward price momentum and tighter lending standards suggest a soft March to kick off the spring selling season, the report said.

On a four-week moving average, which smooths out volatility, the MBA said its market and refinancing measures declined and the purchase index was little changed.

On that basis, the seasonally adjusted market index was 1.6% lower at 659.8, the purchase index stood at 409.6 compared with 409.7, and the refinancing gauge was down 3.4% at 2,129.9.

Found here.