Low mortgage ratesHowever, for some homeowners, they offer the opportunity to save money through refinancing their mortgages. For those at risk of refinancing, there are several factors to consider.
“If the homeowner has good credit and is currently paying an interest rate of 3.5% or higher, it is highly recommended to consider this refinancing as it has interest rates well below 3%. “We will,” Greg McBride, chief financial analyst at Bankrate.com, told CBSN Thursday. He said their consumer finance company recently saw homeowners fix a 30-year fixed rate at around 2.75%. “That is, there are significant savings. That’s a way to reduce those payments — $ 200, $ 300 per month.”
This year’s mortgage rates have risen from record lows during the 2020 coronavirus pandemic heyday. However, interest rates remain low, with a national average 30-year fixed mortgage rate of 3.28% and an average 30-year refinancing rate of 3.29. Percentage as of Thursday, according to Bankrate.
Find the “perfectly best deal”
As a general rule of thumb, if interest rates are below the original loan and you can reduce interest rates by at least 0.5 percentage points, it is worth considering refinancing. Some homeowners may want to refinance to switch to a 30 to 15 year mortgage. In this case, you may be able to repay your balance faster with less total interest.
However, be aware of any additional costs associated with refinancing, such as origination, appraisal fees, title insurance and taxes. McBride recommends getting quotes from three different lenders and looking for the “best deal overall” that includes accounting for fees as well as the best rates.
Whether you’re buying or refinancing a home, another way consumers can lower interest rates is with mortgage points or “discount points.”
“This is just a way to lower interest rates. One point is equivalent to 1% of the loan amount, so if you’re borrowing $ 300,000, one point costs $ 3,000,” explains McBride. .. “This is effectively prepaid interest. That one point can reduce interest rates by a quarter percentage point. Over time, the savings are actually summed up.”
Time is important, he added.
“Point break equal points-usually about 6 years, so I’m not a big fan of it, especially for those who are tied to cash, especially at low rates,” McBride said.
Is Refinancing a Mortgage Suitable for You?
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