Should you think about refinancing your mortgage loan when rates are going up? This question doesn't matter when rates are going down. Whether you have a fixed loan or a home equity loan, you should think about refinancing. When rates are going up, I think you should only think about refinancing if you want to use the equity in your home to get cash or if you think now is a good time to lock in a fixed rate.
If the market looks like it will keep going up for a while, getting a fixed rate now can save you money in the long run. Adjustable-rate mortgages (ARMs) have a low rate for the first 12 months, but after that, the rate can go up. Based on what you agreed to in the beginning, this means that your rate could go up by about 2.75 points. This means that your payments will be much higher than they are now.
When you refinance, you should think about how much it will really cost. It takes time to get back the money you spent to set up the financing. Do you plan to stay in your home for a long enough time for this to be a good choice right now? If not, I would look for home equity loans with very low interest rates. If you get along well with your banker, he might be able to get your costs for a home equity line of credit or loan lowered. Just ask, it doesn't cost anything to find out what might happen.
If you need a fixed mortgage payment to keep your peace of mind, you should get one. Rates go up for a while, then stay the same for a while, before starting to go down. For the Fed to lower rates, there will have to be a change in how the market thinks and how much people spend.
If you don't have a good reason, don't refinance your loan. When rates are going up, I don't think it's a good idea to use the money from a loan to pay for a new trip or luxury. If you need to pay off debt, think about it before you do anything else.
Ask questions, find friends who know a lot, talk to your bankers or people who work with investments—just do something. If you want to, you can lower your mortgage payment or just get a fixed payment.
