This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Waiting To Refinance: A Dangerous Game?





Have people gotten blase about low mortgage rates?

After rising a bit during August, 30-year mortgage rates recently fell back to their record low of 3.49 percent. There was little fanfare. The U.S. is seeing the lowest mortgage rates since comprehensive records started to be kept in 1971, yet people are taking them in stride. However, if you are still waiting to refinance your mortgage, you may be playing a dangerous game.

The importance of refinancing

Even though mortgage rates have been low for a few years now, there are reasons to believe that many people have not yet maximized their refinancing opportunities.

For one thing, people whose home values fell below their remaining loan balances have generally been prevented from refinancing. However, with the passage of time and some recovery in the housing market, they may now be in a position to refinance.

Another thing is that mortgage rates have fallen so far that even people who have refinanced once may now be able to do it again and save still more money. Given the extraordinary drop in mortgage rates, don't assume that refinancing once is enough.

Just because mortgage rates have been low for a long time now, and the Fed has promised continued intervention in the bond market to hold rates down, you shouldn't have a false sense of security about rates remaining this low indefinitely. There is one thing that could send mortgage rates higher in a hurry: inflation.

Three warning signs for inflation

Mortgage rates generally stay ahead of the prevailing inflation rate -- after all, banks won't want to make a loan if they don't think they'll get more back than the rate of inflation over the term of the loan. Mortgage rates have been able to stay low in recent years because inflation has been very mild. However, there are at least three reasons to suspect this might change:

  1. A warning shot in August. Inflation had been calm so far in 2012, until the Consumer Price Index jumped by 0.6 percent in August. That may just be a one-off reminder of what inflation can do, but even a warning shot can become a self-fulfilling prophecy if it scares manufacturers and retailers into boosting their prices to keep up.
  2. Unrest in the Middle East. Anti-American riots across the Middle East are just the latest reminder of how vulnerable the oil supply is. It doesn't take much of a disruption to send oil prices higher -- especially once speculators start piling on.
  3. Changes in China. Workers in Shanghai recently rioted over labor conditions at a Foxconn factory, which supplies electronics to prominent U.S. firms such as Apple, Dell, and Microsoft. It is a reminder that while China has long been a source of cheap consumer goods for the U.S., its economic development could mean that its workers will start to demand more. Throw in some election-year protectionism on the part of U.S. politicians and you have a formula for higher import prices.

The lack of compelling investment opportunities these days has many people frustrated. However, a compelling opportunity to save money should be greeted with at least as much enthusiasm as an attractive investment -- meaning it may be wise to assess your refinancing options before it is too late.

null

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,122.01 +15.31 0.09%
S&P 500 2,000.12 +0.10 0.00%
NASDAQ 4,569.6210 -1.0160 -0.02%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs