Is it the Right Time to Refinance Your Mortgage?

Right now, a lot of homeowners and investors are talking about refinancing. But, how do you know if this is actually a good option? Not only do homeowners need to think about whether it’s the right time to refinance, but if refinancing is actually a good idea for them. There is a lot to think about, but if it is a good idea for a homeowner to refinance, there’s no better time than right now to do it. 

Why Refinancing Might be a Good Idea

Refinancing can help save a ton of money if it’s done at the right time. If the current mortgage rates have gone down significantly since the home was purchased, it’s possible for the homeowner to save quite a bit of money on their monthly bills. Right now, the rates on a 30-year fixed-rate mortgage are actually down from last year. Homeowners who bought a $300,000 home last year could refinance right now and end up saving hundreds or thousands per year in their mortgage payments. This is a great option for those who have a high mortgage rate right now and want to save money, pay off other debt, or make sure the home is paid off as fast as possible. 

The Changes in Mortgage Rates

Mortgage rates don’t ever stay the same. They tend to follow the prices for 10-year Treasury yields. When investors are buying more bonds, the mortgage rates will go down. When investors aren’t purchasing as many bonds, the mortgage rates tend to go up. Right now, investors are nervous, so they’re not investing in stocks. Instead, they’re buying Treasury bonds. This means mortgage rates are continuing to fall.  Considering the countless factors that go into markets and rates, no one can predict how long rates will stay low.  If history is an indicator, however, rates won’t stay this low forever.  

The Coronavirus and How it Impacts the Markets

The coronavirus is causing stocks to plummet in certain industries, and explode in others.  We are experiencing an incredibly uneven period of economic uncertainty and volatility.  This year we have witnessed record-breaking decreases or increases within a single day, week, month, quarter. This is leading many investors to pull their money out of the stocks and put them into Treasury bonds, which are generally considered a lot safer. This is causing stocks to experience more volatility, which makes investors even more nervous. 

All of this fear caused by the coronavirus is actually good for homeowners who want to refinance. The rapid increase in Treasury bond purchases means that mortgage rates are dropping quickly. Last year, national aggregate mortgage rates were around 4.5%. At the end of February, the national average rate had fallen nearly a full percentage. With the damage from Covid-19 continuing, mortgage rates are continuing to fall.  A recent bankrate national survey has the US mortgage rates experiencing new lows.  For homeowners, this could be a great opportunity to lower their monthly bills through a refinance. 

Should You Refinance Today?

All of this leaves homeowners wondering if it is a good time to refinance. This is going to be a personal decision, as different homeowners will want to refinance while others may not want to right now. Those who plan to be selling their home soon, for instance, should not refinance now because they won’t see savings. It’s also not a good idea to refinance if the homeowner has been paying on the mortgage for a number of years now. If a homeowner has been paying on the home for a number of years, refinancing to a new 30-year mortgage, while it might have lower payments, will mean they’re paying off the home for much longer.

Homeowners who have purchased their homes in the last few years may want to consider a refinance. Those who purchased the home a year ago, when the average mortgage rate for a 30-year mortgage was more than 4.5%, may want to refinance as they’ll see significant savings. Those who have owned the home longer and have a higher mortgage rate can still save, as long as they look into their options. If the homeowner is able to get a 15-year mortgage, for instance, with a lower interest rate, they may be able to save some money and pay off the home faster. 

Whether or not a refinance is a good option is going to depend on the homeowner. If you’re thinking of refinancing, see if it might be a good idea for you to do so right now. With the concerns due to the coronavirus, mortgage rates are reaching an all-time low, so if a refinance is a good option, now is the time to do it.

Get a personalized loan consult with one of our experts today.