When considering refinancing your mortgage, there are a range of factors to consider. All things being equal, if refinancing will save you money, build equity, and allow you to pay off your mortgage faster, it’s a good idea.
Whether you will experience these good outcomes by refinancing your mortgage will depend on a number of economic indicators. However, if you are a homeowner who has been considering refinancing for some time, there are a number of indicators that make right now the perfect time. Let’s look at a few significant reasons why the current economic landscape is ideal for attempting to remortgage your home loan.
The Fed Is Cutting Rates
While the Fed’s actions don’t directly control mortgage rates in the way that they control rates in other areas (such as, CD interest and savings accounts), decisions that the Fed makes do clearly influence mortgage rates. Specifically, the Fed influences the rates paid by individuals on fixed-rate home loans when they seek new mortgages or attempt to refinance.
Recently, the Fed has announced that it intends for rates to be low for the foreseeable future. This is good news for homeowners who are hoping to refinance their mortgages.
Interest Rates Are Low Generally
While the coronavirus pandemic has had a range of immeasurable and devastating effects on the lives of everyone, it has also affected the markets in novel ways. For example, general mortgage rates have been at historic lows this year, measuring at less than 3% as of September. Rates will inevitably rise at some point in the future, which means now is a great time to attempt to renegotiate and lock in the current fixed-rate low interest that is available.
Additionally, if you have already paid the majority of a 30-year fixed-rate mortgage, it is worth noting that 15-year mortgage interest rates are also historically low. Some homeowners will be able to refinance and use the existing low rates in order to shave years off of their current mortgages and save a significant amount of money on interest in the long run.
Fixed-rate Mortgage Interest Is Currently Similar to Adjustable-rate Mortgages
Adjustable-rate mortgages (ARMs), unlike fixed-rate loans, maintain a fixed-rate of interest only for the first several years and then their interest begins to fluctuate based on the typical rates in the market from year-to-year. Because of this, they usually offer homeowners lower interest rates for their first few years.
However, like most things in 2020, the markets have been unusual. The current rates on 30-year fixed mortgages are, in many cases, as low as the first few years on current ARMs. This means that the current climate is ideal for those with older mortgages to attempt to refinance based on the presently low rates.
Additionally, if you already have an ARM because you initially planned to live in your home for a relatively short period of time, you may be able to refinance in a way that secures a fixed-rate determined by today’s market.