If you're one of those who believe that the chances of refinancing your home are only slightly better than the odds of your winning the lottery, think again. The fact of the matter is that mortgage rates probably haven't been this low in your lifetime.
On January 3rd, foxnews.com reported that the average rates for fixed mortgages came even closer to setting new record lows. This trend has made home-buying and refinancing easier and helped fuel a mild housing recovery. Giant mortgage buyer Freddie Mac said that same week that the average rate on the 30-year mortgage dropped to 3.34 percent from 3.35 percent. That's very close to the 3.31 percent rate that occurred in November, the lowest rate on record going back over 40 years to 1971.
Fifteen-year fixed mortgages were also lower down from 2.65 percent to 2.64 percent with the record being 2.63 percent. Also according to Freddie Mac, the 30-year fixed mortgage rate during 2012 averaged 3.66 percent, the lowest annual average in 65 years. Lower mortgage rates have compelled more home owners to refinance which typically leads to lower fixed expenses and increased spending. Nearly 70 percent of economic activity is driven by consumer spending. All of this means that now is the time to refinance before rates begin to tick up.
Back to interest rates for a moment. There are two ways to look at them. The bad news is that you have to pay interest on the money you borrow. The good news is that it's probably at least partly a tax deduction even with new financing. Mortgage interest and property taxes are deductible from federal and state taxes, as are at least some portion of any points paid to secure a loan to refinance your home. You'll want to get more exact information from your lender or loan broker.
Ask just about anyone and they'll tell you that owning a home is definitely an integral part of what they consider "the American Dream." While there are clearly excellent financial reasons to refinance there are also an equal number of non-financial, purely emotional ones as well: Your newly more affordable home will be yours for less and possibly in less time. Many people who refinance opt for 15- or even 10-year mortgages and get to host a mortgage deed burning party that much sooner.
When you lower your monthly mortgage payments you may also be lowering the amount you can deduct from your taxes each year. According to homebuying.about.com, "When borrowers use the amount in excess of the existing mortgage to buy, build or substantially improve principal residences, meaning year-round dwellings, or second homes such as vacation retreats, their interest payments come under the rules for home acquisition loans. Those rules allow them to deduct the entire interest as long as the excess plus all other home acquisition loans do not exceed $1,000,000, dropping to $500,000 for married couples filing separate returns."
A full recovery for the housing market is still a long way away, but that doesn't mean you should wait on saving money on mortgage payments . Lenders are up to their ears in loan requests and it can take a while to get yours processed and approved.