Refinance Now Before Record Low Mortgage Rates Vanish

There’s very little that the COVID-19 pandemic outbreak hasn’t touched, but some homeowners may find financial relief in the pandemic’s impact on home refinance prices and mortgage rates. Even homeowners who bought as recently as last year may benefit from refinancing their existing mortgage right now. Low rates won’t last indefinitely; and with uncertainty surrounding the end of the pandemic, the state of the economy, businesses and schools reopening, those who are considering refinancing their mortgage loans are advised to act sooner rather than later.

The first step homeowners should take is to educate themselves on how refinancing your home works. It’s also critically important to compare rates and mortgage lenders to run the numbers to see if a mortgage refinance makes financial sense for your budget (specifically, whether it can help lower your monthly payment).

Is it a good time to refinance your mortgage?

In short, the answer is yes! From the start of the coronavirus pandemic in the U.S. in March, mortgage rates have dropped to the lowest rates seen since the 1970s. The Federal Reserve cut interest rates twice in early 2020 in order to spur the economy at the height of the pandemic. Currently, according to Freddie Mac, the rates for a 30- and 15-year fixed-rate mortgage are as follows:

• 30 year – 3.07 percent
• 15 year – 2.56 percent

Although mortgage rates since the recession of 2008 have barely risen above 5 percent, many recent homeowners have already received the benefit of lower rates,. But, right now the math on refinancing means that homeowners can save even more if they’re willing to explore their loan options. To see how much you could save, check out MortgageDepot now.

IT’S A GOOD IDEA TO REFINANCE YOUR MORTGAGE WHILE RATES ARE LOW

Here’s an example, a homebuyer purchased a $400,000 home in December 2018 at 4.64 percent on a 30-year loan. That homeowner is ready to refinance now to the current 30-year rate and this could cut their monthly payment down by $280 each month resulting in savings of $51,000 over the life of the new home loan.

Those homeowners wanting to refinance to a shorter-term home loan can see even more savings. By referencing the $400,000 example above, if a homeowner with a 30-year loan refinanced to a 15-year mortgage, the monthly payment would increase nearly $700 due to the shorter time frame, but the homeowners would save over $197,000 in interest compared to the 30-year mortgage.

Dropping home values could make refinancing more expensive

The housing market does move slowly, but with the predictions of the second wave of COVID-19 coming this fall and a the spike in cases that have already begun this summer, homeowners could still see a drop in their home values in the months to come.

The housing market’s volatility is another reason homeowners should consider refinancing sooner rather than later. A drop in home value may make refinancing to the most competitive rates difficult as lenders use a property’s current market value in their loan-to-value ratio (LTV). Even though a homeowner could still refinance even with a slight dip in home values, this might mean missing out on current historically low mortgage rates.

HOW CORONAVIRUS IMPACTS YOUR HOME’S VALUE

Does it make sense to refinance your mortgage now?

Refinance rates also vary based on a homeowner’s personal financial situation and credit score, but for those with strong credit and secure employment, the time may be right to take advantage of significant savings offered by refinancing. (Again, check out MortgageDepot for more information on current rates and how to compare your own numbers before applying to refinance your home).

MORTGAGE RATES HIT A ‘SWEET SPOT’ — AND WHY NOW’S THE PERFECT TIME TO REFINANCE

Refinancing a home loan costs money due to loan origination and lender fees, but for those who can refinance and “break-even” within a month or two of the new loan origination, a refinance may make financial sense, even after factoring in the costs of the new loan.

As states begin the process of reopening and the economy recovers, mortgage rates this low may not be seen again, making right now the best time to obtain the lowest mortgage refinance rate possible.

Contact one of our loan consultants to learn more about this program.