Rates dropped below 3% – Refi window is still open

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Mortgage rates fell slightly this week – and only once in the last nine weeks has touched 3%.

Last week on average 30 year fixed rate mortgage decreased to 2.93%, according to Freddie Mac’s Weekly Assessment Poll

Until today’s mortgage interest rates above recent record lows, they are still exceptionally low. “This is a good time to be an American consumer, perhaps the best in recent times,” says Joe Brusuelas, Chief Economist at RSM, an audit, tax and consulting company. “Don’t get lost in the fog” I didn’t do that last year. ”

So if you have been waiting on the sidelines not knowing if you should take this mortgage or refinancing rates, you still have the option to lock in a low rate.

A low rate does not always guarantee that the mortgage will be profitable for you. Home prices have skyrocketed and could offset the potential savings that buyers could get from the low interest rate. “We are very sensitive to interest rates,” says Elizabeth Rose, Certified Mortgage Planner at AmCap Home Loans. “[Borrowers] I heard that someone in the office got a rating of 2.875% and they just want that rate, but they don’t know why. “

However, those same low rates and rising prices have given people who are already homeowners an increased opportunity to lock in savings by refinancing their current home loan.

The refinancing decision has to be more than just getting the best interest rate. Therefore, before you decide whether to refinance or not, there are a few things to consider.

Two questions to ask yourself before refinancing

There are good rules of thumb when it comes to refinancing.

“Throughout my career, I’ve heard that if you can’t cut the rate by 1% or 2%, then there is no point in refinancing,” says Rose. But there are exceptions to every rule, and the decision is ultimately personal, she adds. “It may not make sense for one person to cut the rate by 1%, but for another it frees up enough money to pay off the credit card debt.”

Today’s low interest rates may get all the attention, but sometimes personal factors are more important to consider. This is why it is important to understand What for you want to refinance. Here are two important questions to ask yourself.

1. What are your financial goals?

Home loan refinancing is just one financial tool that can help you achieve your goals. Lowering the interest rate or shortening the loan term can save thousands of dollars in interest or shorten the mortgage payment years. The ultimate goal here is to minimize debt and lower the debt horizon. If you can afford higher monthly payments on a short-term loan, “this is a really good opportunity to create wealth,” says Brucewelas.

You may also want to turn your home equity into cash if having the extra money allows you to consolidate other high interest debt or take an investment opportunity. Compared to other types of debt cashing refinancing can lower the overall percentage you pay. If you have $ 20,000 in private student loans at 6% and $ 5,000 on a credit card at 15%, you can cash out $ 25,000 from your home equity at 3.5% and pay off other debts.

2. How long will you stay in your current home?

Refinancing is paid. You usually pay between 3% and 6% on closing costs. These fees can be paid out of pocket or transferred to the loan balance using refinancing without closing costs… Regardless of how you pay them, they should consider your decision.

In most situations, refinancing makes sense if you plan to stay in your home long enough for the savings to outweigh the costs. For example, if you calculate $ 250 monthly savingsand your final cost is $ 10,000, you will pay off in 40 months or just over four years. To calculate your breakeven point, divide the upfront cost ($ 10,000) by the monthly savings ($ 250). In this case, the monthly savings of $ 250 allows you to cover the closing costs for 0-40 months. If you move before 41 months, you are at a loss and did not save. But 41 months is when savings start.

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