You may have read or heard a common phrase “mortgage rates are currently at an all-time low.” It is fairly true because the federal interest rates have come down in recent years. Thus, it is the best time to secure a first-time mortgage or refinance your mortgage.
Why Have Mortgage Rates Fallen?
Mortgage rates are currently at their lowest – thanks to extremely low rates by the U.S. Federal Reserve. The federal rate dropped to near zero in recent months as the Federal Reserve response to economic downfall due to the COVID-19 pandemic.
During a recently Federal Open Markets Committee meeting, all members unanimously voted to keep the rates between 0 and 0.25 percent –that is a record-breaking low.
According to FOMC’s statement on this decision, they kept the interest rate low because of an ongoing health crisis. They realize that the coronavirus will heavily impact employment, inflation (in the near term), and the economy.
The Federal Reserve is not directly responsible for controlling the mortgage rates. However, fed rates signal if the economy is booming or struggling, and the mortgage rates follow the trend.
In the current scenario, the federal interest rate is down to between 0 and 0.25 percent, signaling that the economy is struggling. Hence, various interest rates, including mortgage, are down to record lows.
As of June 25, 2020, a 30-year fixed-rate loan rate now starts at as low as 3.25 percent. On the other hand, a 15-year conventional fixed-rate loan is at 3 percent, whereas other mortgage rates, including refinancing your mortgage, are also offering low rates.
So, if you are contemplating refinancing your mortgage at a cheaper rate, now is the time. You need to act quickly before the demand increases, and the rate pushes upward.
2 Types of Refinancing Your Loans
There are two types of refinancing loans you can opt for.
- Cash-out refinance
- Short refinance
3 Things to Consider
There are three things you must consider when refinancing your mortgage.
- Mortgage rates
- Mortgage refinancing fees
- Details of the mortgage refinancing process by your lender
Refinancing your mortgage may take time and money. Most importantly, it must make financial sense in the long-run. Thus, before you go through the entire exercise, calculate how much money you will save by refinancing your mortgage.
Look at your current monthly payments and compare them with the new payment schedule to find out how much your long-term savings will be. If you are of two mindsets, let the experts help you make the right decision.