Mortgage rates jump to 3.11% – the biggest jump since March

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Average 30 year fixed rate mortgage increased to 3.11% this week from 3% last week and is the largest weekly gain since mid-March.

Even with this 0.11% increase, which means mortgage rates today above recent lows, they remain near late February levels – and well below historical averages. This means that home buyers can still receive low interest rate when buying a home, and existing homeowners can benefit from refinancing

ABOUT LATEST MORTGAGE RATES

Average mortgage rate last week is based on mortgage rate information provided by national lenders Bankrate.com, which, like NextAdvisor, is owned by Red Ventures.

But low rates are not everything. Whether buying or refinancing, it’s important to think about what makes sense given your unique financial situation and goals. House prices increased over the past year, and without more advance payment, you will have to take out a large loan.

Refinancing can do more than just lower your rate and monthly payment. If you are already a homeowner, you can use these low rates to shorten your mortgage term, save on total interest paid, speed up repayment terms, or finance costs such as home renovations or college tuition.

Here are some reasons why refinancing can make financial sense:

Benefits of refinancing at a lower rate

Refinancing can reduce monthly payment in some cases, saving thousands of dollars in interest. Here’s an example to show how this might make sense:

  • Home purchase price: $ 300,000
  • 10% down payment: $ 30,000
  • 30 year mortgage
  • Interest rate of 4.5% on a loan of USD 270,000 (after down payment)

Using NextAdvisor mortgage calculatorin five years the loan will be repaid up to about $ 245,700.

When you refinance a 30-year loan with a lower rate of 3%, monthly payments are reduced by $ 233 and you will save almost $ 36,000 in total interest.

Loan balance Interest level Monthly principal and interest Total remaining percentage
Current loan USD 245,700 4.500% USD 1368 USD 163,385
Refinancing loan USD 245,700 3% USD 1135 USD 127,414
Difference 1.500% USD 233 USD 35,971

Remember it’s important to consider closing costs with any loan. Depending on how much you save on the new rate, the costs of closing may outweigh the benefits. You also want to consider break-even period, that is, how long it will take you to recoup the closing costs by saving on refinancing.

Two common ways to refinance

A lower interest rate can potentially lower monthly payments and free up monthly cash flow. But there are other reasons why refinancing can make financial sense, depending on your goals.

1. Shortening the loan term can save you in the long run

For some homeowners, it may be a good step to shorten the term of their mortgage by refinancing a 30-year mortgage. for a mortgage for 15 years… Shortening the loan term and getting higher payments may seem counterintuitive with low interest rates, but you will be able to pay off your home earlier and save more in interest in the long run.

Same, Mortgage rates for 15 years usually less than 30 year mortgage… Thus, while your payment may be higher due to the shorter term, you will end up paying even less interest over the life of the loan.

Using NextAdvisor Refinancing Calculator, Here’s an example of how much interest you can save by refinancing a 15 year mortgage:

Maturity Principal (up to percent) Interest paid (rate 3%) Total cost of the loan
30 year mortgage USD 150,000 USD 77,700 227,700
Mortgage for 15 years USD 150,000 USD 36,500 USD 186,500
Saving USD 41,200

Shortening your mortgage in this way will save you over $ 41,200.

2. Higher monthly payments can be affordable and shorten debt relief periods

A common misconception is that payments on a 15-year mortgage are double the payments on a 30-year mortgage. However, depending on your particular loan, you may find that the mortgage payment may not be very different from the mortgage payment. 30 year mortgage.

For example, a loan of $ 150,000 with 3% repayment over 30 years would have a monthly payment of $ 632. Here’s how it compares to the monthly payment on a new 15-year loan:

Maturity Principal (up to percent) Monthly payment at 3% per annum
30 year mortgage USD 150,000 USD 632
Mortgage for 15 years USD 150,000 USD 1,035

Cutting the loan term in half through refinancing increases the repayment to $ 1,035. This is less than double the payment, but you will pay on your mortgage in half the time, while saving on interest.

Another popular option is pay a 30 year mortgage like a 15 year mortgage. All you have to do is make additional payments, whenever possible, to your 30-year payments. Doing this regularly will speed up your mortgage payments in the same way without committing to higher payments.

By refinancing and reducing the mortgage to 15 year term, in the long run, you can keep more money in your pocket. You will not only save on the total amount of interest, but also pay for your home faster. Without paying off your mortgage, you can use the extra cash flow to start a business, buy an investment house, pay for college tuition, invest and save on retirement, or travel.

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