Is it a Good Time to Refinance My Mortgage?
We’re in the middle of a refi revolution. Freddie Mac has reported that mortgage rates have hit their lowest in at least 50 years. As of May 28, 2020, the 30-year fixed-rate dropped to an average 3.15%, while the 15-year fixed-rate hit 2.62%.
The result? People are rushing to refinance in record numbers. $355 billion worth of refinance originations were reported by Freddie Mac in the first quarter of 2020. Compare this to $125 billion during the same timeframe last year, and it’s clear to see that many Americans are taking advantage of the lower rates.
But should you? There are some clear benefits and opportunities you may be able to take advantage of. That said, there are also some caveats to consider that we should tackle first.
Reasons Why Refinancing May Not Be a Good Idea
Is your job situation rough or on the rocks? If so, you may want to pump the brakes on refinancing now. Losing your job or getting furloughed because of COVID-19 can negatively impact your refinance application. This would also affect a related factor that would prevent you from successfully refinancing your mortgage.
Is your credit score low? Losing your job can certainly affect this. But even with steady employment, you’ll want to make sure your credit score is up to snuff. And if you want the lowest mortgage interest rates, a credit score of 760+ is recommended.
What does your home equity look like? Adequate home equity of at least 20% will make it easier to qualify for a loan. Home values were on the rise at the end of 2019, so this is good news.
Benefits of Refinancing Now
What if the previous three reasons don’t apply to you? Refinancing could set you up well for years to come.
The biggest benefit is the most obvious: record-low interest rates and insane savings. Seizing the opportunity now can mean tens of thousands of dollars of savings over the life of your loan. For instance, one Business Insider correspondent is now set up to save $50,000 in the long run. Lower rates and payments will always be welcome news in uncertain times.
Another benefit you can take advantage of is releasing equity. If your home equity has increased since your purchase date, refinancing now can mean getting some extra cash. This can be used for emergency expenses in a pinch. This benefit isn’t for everyone, but it can help those in unique circumstances.
You should also consider refinancing now to change the terms of your mortgage loans. There are pros and cons to a 30-year or 15-year fixed-rate mortgage, and everyone should consider their current financial goals to see if paying off the house faster is the way to go.
Consider All Your Refi Options
Ready to explore whether refinancing is right for you? At UW Funding, we are home loan refinancing experts. We can help you navigate the current unstable climate with your current financial situation and goals. Contact us to get started—we help families nationwide!