With mortgage rates still trending low, we’re seeing a huge uptick in refinancing applications – almost 2.5 times more than this same time last year, according to Mortgage Bankers Association. If you bought your home within the last two years and have been considering refinancing, now is a great time and here’s why:
- Home loan interest rates are still at their lowest point since 2016.
- Buyers who took on a mortgage over the last year and a half are more likely to have a higher interest rate as 30-year, fixed-rate mortgages offered through 2018 were around 4.54%, according to Freddie Mac.
- Black Knight estimates that roughly 10 million borrowers could save at least 0.75 percentage points by refinancing
Shorter Loan Term
If your current interest rate is around 4.5% or higher, there is a strong possibility that refinancing could help you lower your monthly expenses and shave five years off of your current loan term and keep your monthly payment the same. (See graphic below. Savings based on a $250,000 loan amount.) For those considering refinance as an option, be sure to speak with your mortgage adviser about loan-origination fees as those fees could potentially outweigh the savings.
Have you been dreaming of a new kitchen or adding square footage to your home, but worried that a new cash out mortgage payment will kill your monthly budget? With today’s rates, not only can you borrow for less, but your new payment is likely to be less than your existing one simply because of the lower interest rate.
Ideally, when it comes to cash out refinancing, we recommend putting that cash toward something that improves your home’s overall value versus spending it on new living room furniture, clothing or a Caribbean vacation. Other great options are to pay down high interest credit card debt or put the extra cash towards your family’s emergency fund in the event of an unforeseen hardship.
Whether you’re looking to lower your monthly living expenses, shave time off of your mortgage or do a cash-out refinance for home improvements, we wouldn’t recommend waiting. Speak to your mortgage adviser today and find out if refinancing is the right option for you.