Rush To Refinance -- Or Hold Off?

(CBS)  With mortgage rates at their lowest levels in decades, many homeowners are racing to lenders, seeking to refinance.

But is that the right move?

On The Early Show Friday, Whitney Tilson, founder and managing partner of Tilson Mutual Funds, said now's a great time, but it may pay to be patient and wait a little longer.

Tilson pointed out that mortgage rates have "crashed. Just in the past seven weeks, they've been declining every week. ... For a 30-year fixed rate orange, they've declined to five-point-two percent, which is a 50-year low. That's great news. It's about the only good news in the housing market right now."

So, is now the time to re-fi?

"It's sort of like trying to time the stock market, I suppose," Tilson observed.

He pointed out that a proposal "floating around in Congress" could, if backed by the incoming Obama administration and OK'd by lawmakers, send rates even lower, to the neighborhood of four-and-a-half percent.

"That's the dilemma: Do you grab the 50-year low rate right now or wait a few weeks and you might get a chance to refinance at an even lower rate?"

The answer, he explained, could lie in your circumstances.

For instance, for people with adjustable-rate loans, "Normally, there's quite a big spread. You have to pay more to get rid of your interest rate risk into a fixed mortgage. So, adjustable rate mortgages usually have a quite a bit lower rate, but the fixed-rate has dropped so much that now the rates are the same. So, you're crazy not to refinance into a fixed-rate mortgage. Get rid of your interest rate and lock in this super low rate for 30 years."

That is -- IF you qualify.

"If you're underwater on your loan, if you've missed some payments and all, you probably won't qualify for the ultra-low rates," Tilson noted. "But you're still going to benefit, because all the mortgage rates are sort of pegged to the lowest conforming rate. So, there's some good news there. If someone is in an adjustable rate mortgage in an area where home prices have crashed a lot, they can -- their rates -- when their loan resets, let's say they've got a two-year teaser, it's going to reset to a lower rate, thanks to the overall declining mortgage rates.

His bottom line? "If you qualify, you want to start thinking about refinancing and either get in line right now or maybe wait a few weeks and see what happens with these proposals to drop it even more. But, definitely, you want to be thinking about refinancing. ... Personally, I would probably wait just a few weeks, really, and the new administration is going to announce its economic plans and whether this proposal to drop rates is going to be part of that."

And his words to wise prospective first-time buyers: He would wait to buy: Home prices are still coming down, and if you need to borrow money, we could be talking about lower interest rates, tax credits, etc. in coming months. For sure though, what you want to do is get a fixed rate mortgage -- you want to lock in an all-time low interest rate!

[adeshpande]

Can you refinance and then refinance again if rates go lower?

Follow mortgage rates on Line Spout. http://www.linespout.com?q=mortgate+rates

[susanhelit]

Yeah, market experts are so dumb sometimes. If you''ve got a loan that is killing you, refinance - waiting for a slim chance of a drop means you stand a good chance of waiting yourself right out of your house - especially if rates rise instead.

It''s huge all-time low interest rates right now, and this idiot says to wait for more. That''s how people end up paying the high rates - they wait too long. You might get a fraction of a point if you wait - or rates might just go right on up - we don''t know the future. We know what we''ve got right now.

Me - I''m in a good rate (because I didn''t wait last time rates were low), and I''m looking right now to buy another house because prices are incredibly good. Maybe my new house''s price would come down in a few months - maybe it''d go up - but no matter what, right now it''s a great deal - half of what previous owners paid for it. It''ll go up over the next few years, as housing prices always do. Maybe I could get it a little cheaper later - or maybe I''d lose the whole opportunity.