With mortgage rates falling, is there a best time to refinance?
According to Redfin’s analysis, the majority of Americans (84.2%) have mortgage rates below 6%, but there are still millions of people who could benefit. According to data from Chase Home Lending, about 4.7 million homeowners could refinance advantageously if interest rates fell below 6%. Popular 30-year fixed-rate mortgages have hovered around 6.08% in recent weeks, their lowest level in nearly two years, so many homeowners are likely considering that step. .
Bill Banfield, chief business officer at Rocket Companies, said behind-the-scenes calculations show that a $375,000 borrower who bought a mortgage when interest rates were above 7% saved more than $200 a month. He said it was possible.
But homeowners need to weigh those lower monthly costs against the fees associated with taking out a new loan. A good rule of thumb is to refinance if you know you’ll be able to pay for your closing costs within about two to three years, Banfield said. So if you’re looking to move within the next year or two, it might not be worth it.
Will mortgage interest rates fall?
Experts say it’s better not to put up with lower interest rates if refinancing will benefit households.
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“We don’t think clients should try to time the market,” said Nina Gidwany, head of refinancing and home equity at Chase Home Lending. “It’s very difficult to do that. If you have an opportunity to save money, you should take advantage of it.”
Most experts believe that the drop in interest rates already reflects expectations in financial markets that interest rates are likely to continue falling. But Darryl Fairweather, Redfin’s chief economist, said people should keep in mind that there is likely to be significant market disruption in the coming months, including in mortgage rates.
Part of the reason is political uncertainty, Fairweather told USA TODAY. “Once we actually know who the next president will be, that alone should alleviate some of the uncertainty.” But it also prepares the Fed to take big action, including its first interest rate cut in years. That’s also because it takes time for the market to settle down, he said.
So if you’re still tempted to try to time the market, remember that volatility means interest rates may actually rise for a while before falling. Mr. Fairweather said.
What is the best way to refinance?
Please consult an expert. Ask your mortgage broker or other financial professional to crunch the numbers and decide whether it makes sense to take the plunge now or wait. Be sure to get multiple quotes instead of settling for the first one. Research shows that borrowers who take the time to consider multiple offers can save thousands of dollars.
Read more: Lower mortgage rates bring long-awaited normalization to housing market
When doing so, be sure to cast a wide net. Get quotes from financial institutions you already have relationships with, as well as from different types of financial institutions, including banks, non-banks, and credit unions. There may be mortgage products out there that make the process just a little easier than what it took to get your original loan. For example, Rocket’s Banfield says the company boasts much faster loan closing times than the industry average.
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What about cash-out refinancing?
“Homeowners have access to record amounts of home equity,” said Michael Micheletti, chief communications officer at home equity firm Unlock Technologies. According to ICE data, Americans have about $11.5 trillion in available stocks, which means they can withdraw and still have a 20% cushion.
Gidwany said homeowners who want to consolidate other debts may benefit from a cash-out refinance. Even if you have to change your current low mortgage rate to a slightly higher rate, it could still be less than the cost of a credit card or personal loan.
But if that’s your goal, Micheletti says you should also look into the types of home equity loans, lines of credit, and home equity sharing deals offered by Unlock and Points.