What do I need to know before refinancing?

Question

Anyone taking advantage of these rates and refinancing? My current rate on my FA is 3.75% but im paying $223.51 MIP.

My lender's current rate on conventional loans is 3.25%. If I refinanced my rate would go down 50 basis points and I would get rid of the MIP payments. I don't plan on selling this rental in the near future so im not worried about the additional refinancing fees (appraisal fees, title fees, origination fees, attorney fees - prob around 8k in NY)

Are there other factors to consider? Thanks!

Chris Mason · Answer

Historically with these refi booms, what we see is that rates fall slowly over the course of time. An exception was Monday where they fell and fell fast, by now everyone has already seen that in the news. But, normally, the thought among lenders and banks is "we don't have to be the lowest we COULD be, we just gotta beat the other guy." So, slowly, they under-cut each other over time until consumer offered rates fall to where they "should" be if you just think it tracks 1-to-1 with mortgage backed securities or t-notes (or whatever you believe it is "pegged" to, as if we didn't live in a capitalist society). You might see a rapid shift in the MBS, then rates catch up slowly over the course of days, maybe weeks.

Then it changes. You see that same rapid shift in the MBS, in the other direction, but the shift in consumer rates isn't slow, there's no delay. Overnight, poof, rates went up 0.375%. Here, it's "crap we gotta jack our rates up ASAP or we will be losing money on each loan we do!" Unfortunately no one has a crystal ball and knows when that is going to happen, but every refi boom in history has come to an end, so it must at some point.