Napa homeowners who had been bracing themselves for sharp rises in mortgage interest rates must now be scratching their heads. As the online Mortgage News Daily put it last week, “…rates have been extraordinarily sideways, and right in line with the lowest levels in 11 months.”
Since historical averages are still significantly higher, it’s no wonder that most observers still believe the greater likelihood is for rate increases. But recent Fed happenings show a crack in their avowed determination to let that happen by tapering off purchases of mortgage-backed securities. The hemming and hawing is notable. It’s all pretty much up in the air.
In any case, one thing I can guarantee is that Napa mortgage holders will benefit if they take advantage of savings opportunities when they present themselves. Among current possibilities—
1. Refinance Your Mortgage
Napa mortgage holders who haven’t already refinanced should at least consider doing so. Refinancing means taking advantage of the still historically low Napa interest rates—often the most meaningful step in reducing your monthly mortgage payments. Before deciding to refinance, make sure that the mortgage costs involved will be less than the resulting savings. If you agree with the prevailing wisdom that it’s unlikely we will see a significant drop in interest rates in the near future, today’s levels still look inviting.
2. Cancel Private Mortgage Insurance (PMI)
According to the National Association of Realtors®, mortgage down payments have fallen over the past decade. Their figures show that the average mortgage down payment in 2013 was 10% – compared with 16% just ten years earlier. Homeowners who put down less than a 20% deposit are typically required to take out Private Mortgage Insurance. But once the Loan-to-value (LTV) ratio falls below 80%, homeowners can ask for the PMI insurance to be removed—and they should, because the lender isn’t responsible for keeping track of that for them. If you are close to the 20% threshold, it may be worthwhile to make a one-time payment that will reduce the principal below 80%.
3. Extend the Length of the Mortgage
Many homeowners have made significant reductions in their principal by opting for shorter-term mortgages. But should rising Napa interest rates make a property you are trying to buy unaffordable, extending the length of the mortgage can reduce monthly payments to a more comfortable level. Although over the long term this will end up costing significantly more in interest, moving from a 15-year mortgage to a 30-year can sometimes be the right move—especially when the property at stake represents one of the terrific values currently out there.
While interest rates in Napa may rise or fall or, as we’ve seen lately, hold surprisingly steady, sudden leaps or plummets are unlikely…and with a little preparation, unpleasant future surprises in interest rates are avoidable.
Thinking of buying a home in Napa this summer? Call me today to start laying the groundwork!