It seems like everyone I know is asking this question right now. Mortgage rates are at an ALL TIME LOW As of July 2, 2020, Freddie Mac reported that 30-year mortgage rates are at 3.07%, on average, the lowest rate since they began tracking in 1971.
As you can imagine, there are a lot of people scrambling to buy or refinance while rates remain this low. How do you know if it makes sense for you?
Like most things, it really depends on your situation. The absolute most important question to ask is how long you plan to stay in your home. If the answer is less than 3 years, there’s a good chance that refinancing won’t make financial sense.
If however, you plan to stay for several years, it’s probably worth looking into. Some of the other questions to consider are:
- What is the main objective? Is it to lower payments? Pay off the loan faster?
- What is your current rate? If you’re already in a mortgage with 3.5% interest, lowering it to 3.25% probably isn’t worth it. There’s no hard and fast rule here, but I wouldn’t consider refinancing unless the rate is at least .5% better than what you currently have.
- How much are closing costs? And how soon would you “break even”?
- How far into your current payoff period are you? If you’re 20 years into a 30 year mortgage, you’re well into the stage of paying more principal than interest. I would not jump into starting that clock over again.
Refinancing may be a great option for many people during this time. Keep in mind that it may be even harder to get approved, especially if you (or your partner) have had a change in your income due to the pandemic. Check out the refinance calculator at bankrate.com. And as always, feel free to schedule time to chat with me if you have any questions.
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