Why Mortgage Refinancing May Still Be Right For You

Why Mortgage Refinancing May Still Be Right For You

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Some homeowners can still save money with a refinance, even in the current rate environment.

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After the Federal Reserve raised your benchmark interest rate 0.75 percentage point, concerns about how the stock could affect personal finances of millions of Americans soon emerged.

“Reducing inflation will likely require a sustained period of below-trend growth and will most likely require an easing of labor conditions,” Federal Reserve Chairman Jerome Powell said at a Sept. 21 news conference.

“We’ll keep doing it until we’re sure the job is done,” Powell added.

This is not good news for homebuyers, especially after the average interest rate for a 30-year mortgage hit 6% in early September, the highest since 2008. Mortgage refinance rates also rose , hovering around 5.5% compared to 2.15% annually. behind.

While an increase in rates can help control inflation, it doesn’t always help consumers.

However, that doesn’t mean some homeowners can’t still benefit from mortgage refinancing. In fact, even with the rate increase, select homeowners can still save money with a refinance.

If you think you might benefit from refinancing, or just want to learn more about the potential benefits, talk to a mortgage specialist today.

Here are three types of homeowners who can still benefit from refinancing their mortgage.

Homeowners with high interest rates

Mortgage rates, particularly during the pandemic, have hovered near record lows. But, if you have a higher interest rate (think 6% or higher), you may benefit from refinancing your mortgage in the current rate environment. The best time to refinance your mortgage it is often tied to your individual circumstances and preferences.

Keep track of Freddie Mac’s weekly rates to compare with yours. If you can get a rate that is a full point less than what you currently have, most professionals will advise you to take it. Even a drop of half a point can be worth it, especially if your initial home loan was large.

Check the numbers and do the calculations. You may still be able to save money.

Homeowners who want to pay off their loan early

The 30-year home loan is the most popular, in large part because it spreads payments out over a more manageable spread. But it takes decades to pay off the loan (assuming you make conventional payments and don’t pay every two weeks).

But what if you want terminate your loan early? If you inherit a large sum of money or simply want to eliminate what is likely to be your largest monthly bill, it may be worth looking into a mortgage refinance loan. By shortening the term of the loan, you will be able to pay it off and build equity in the home faster.

Be careful, though. Shortening the term of your loan may cause your monthly payments to increase, albeit for a shorter period.

Talk to a mortgage refinancing expert who can guide you.

Owners who want to lower their PMI

If you initially bought your home with a down payment of less than 20% of the home’s value, the lender probably added private mortgage insurance (PMI) to your monthly bill. You may be able to refinance your home loan to eliminate this payment if the value of your home has increased since the time of purchase.

If you own a home in a part of the country where values ​​have risen, then you may be unnecessarily paying PMI. Refinancing could help eliminate it. Just make sure the numbers make sense (for example, you don’t want to refinance to eliminate $80 PMI and increase your monthly payment by $160 total).

A mortgage expert can help determine if you are a good candidate.

Mortgage Refinancing Status

The current state of mortgage rates and mortgage refinance rates are clearly not as advantageous as they were in 2020 and parts of 2021. But, if inflation doesn’t cool off, the current rate environment may be the best that buyers and homeowners can wait on the foreseeable. future. So don’t discount the potential benefits of refinancing, even now.

Not sure if this is the right time for you? Consider working with an online financial advisor who can help you.

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