Why Refinance? Mortgage Rates are Historically Low
On June 8, the 30-year fixed mortgage rate dropped to a seven month low, and averaged 3.89% for the week.
This compares to a March 2017 mortgage rate of 4.3%, and counters early year predictions of rising mortgage rates throughout 2017.
Since the 2008 recession, mortgage rates have trended lower
As you can see from this graph of mortgage rates since 1984, mortgage rates are extremely low by historical standards.
If you’re still unconvinced, consider Freddie Mac’s 30-year fixed mortgage rates from the following dates:
- October, 1981 – 18.45%
- May, 1990 – 10.48%
- June, 2000 – 8.29%
- March, 2010 – 4.97%
- January 2014 – 4.43
Refinancing can bring homeowners significant savings
Mortgage refinancing means replacing your current mortgage with a new mortgage, usually with a lower mortgage rate or a different term.
Financial experts recommend refinancing if you can lower your mortgage rate by 1% or greater. This means that if you originally committed to a mortgage with a rate of 4.89% or higher, refinancing with current rates could significantly lower your monthly mortgage payment.
As an example, Sarah refinanced her 30-year mortgage with a 4.95% rate into a 30-year with a 3.95% rate. This lowered her monthly mortgage payment from $1,300 to $1,090.
You can also refinance your mortgage to pay it off faster
Another refinancing method is reducing the term, such as refinancing your 30-year mortgage into a 15-year mortgage.
If you can obtain mortgage rate that’s 1% (or more) lower than your original rate, it’s possible to have a similar monthly mortgage payment while paying off your mortgage in half of the time. Speak with your loan originator about this scenario.
Refinancing into a longer term can lower your monthly payment
If you’re unable to refinance your mortgage into a significantly lower rate, but want to reduce your monthly payment, you could refinance into a longer term.
This causes you to pay more in interest and increases the overall cost of owning the home, but lowers your monthly mortgage payment.
A refinance may not be in your best interest if you bought your home recently
If you purchased a home after 2010, it could be challenging for you to receive a significantly lower mortgage rate, as interest rates have been trending lower since the 2008 recession.
If you purchased a home before 2010, and especially before 2008, you have the opportunity to refinance your mortgage into one with a significantly lower rate.
To learn more about mortgage refinancing, contact one of Open Mortgage’s friendly loan originators.