When interest rates are falling the case for refinancing is clear and obvious. If you can save money each month without big cash costs to refinance then getting new a mortgage is a winner.
But what about when rates are rising? In this situation there may not be any monthly savings. In fact, in some cases monthly costs may actually increase. Does refinancing in such a rate environment — the rate environment we’re seeing now — ever make sense?
Oddly enough, many borrowers — especially those with “nontraditional” loans issued during the past few years — would be smart to refinance, even in a period of rising rates.
While it may be true that interest levels are not as attractive as they were when historic lows were reached in 2003, it’s equally true that refinancing now may be a far better choice than waiting and perhaps facing even-higher rates in the future.
What circumstances am I talking about?
Let’s look at a borrower who knows with absolute certainty that future costs are going to rise — and rise steeply.
Example: You have a 30-year mortgage. Payments during the first...
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