Mortgage rates are super low. Is it time to refinance?

As the world economy copes with the growing concerns amid COVID-19, as well as political factors, mortgage rates are nearing historic lows. While we at Luxury Mortgage acknowledge the seriousness of this illness and advise everyone to take precautions, it should also be noted that the silver lining in any economic slowdown is access to more affordable credit. For homeowners especially, this could be an ideal time to take advantage of low refinancing rates.

Refinancing Applications Spike

Refinancing applications increased a whopping 79% last week and were a staggering 479% higher than they were a year ago, according to recently released data from the Mortgage Bankers Association (MBA). CNBC’s Diana Olick reported on the refinancing boom two days ago, pointing out that the current figures are the highest on record since April 2009.

Low Rates Could Mean Big Savings

The average contract interest rate for 30-year fixed rate mortgages with conforming loan balances ($510,400 or less) was 3.47% at the time of the article’s publication. This average matched the MBA’s December 2012 survey low, showing evidence that rates this low haven’t been seen in nearly eight years.

“Taking into the account the current economic situation and how much rates have fallen, MBA is nearly doubling its 2020 refinance originations forecast to $1.2 trillion, a 37% increase from 2019 and the strongest refinance volume since 2012,” said Joel Kan, an MBA economist. “As lenders handle the wave in applications and manage capacity, mortgage rates will likely stabilize but remain low for now. This in turn will support borrowers looking to refinance or purchase a home this spring.”

Refinancing Options

Homeowners who choose to refinance to today’s low interest rates could effectively lower their monthly payments, helping them save tens of thousands of dollars in the long run. If you intend to stay in your home for a long time, a rate and term refinance could make a lot of sense. Luxury Mortgage offers competitive rates on rate and term refinancing loans, and our expert loan officers can help you navigate the process.

Alternatively, with a cash out refinance, homeowners can cash out their equity at low rates and use the funds for a wide variety of things. Whether you want to pay off higher interest credit balances, remodel your home, go back to school or even start your own business, the cash from a cash out refinance can work as a great financial tool.

For homeowners who want to reduce their loan terms and pay off their mortgages sooner, a refinance could mean shaving off several years’ worth of payments. Whether you want to switch from a 30-year to a 15-year or go from a 20-year to a 10-year loan, now could be the best time to lock in a great rate. The advantage of a shorter term mortgage is the ability to build equity faster and be mortgage debt free sooner. The drawback is that your monthly mortgage payments will more than likely increase, so only homeowners who feel comfortable paying more every month should consider this option.

Speak With Us Today

Not sure if refinancing makes sense for your scenario? Curious about the pros and cons of each refinancing option? Let the loan consultants at Luxury Mortgage help you compare the choices and see what could work best for you.