Eight years after the economic collapse of 2008, mortgage rates are still at near−historical lows. But as the economy gains steam and the unemployment rate slowly returns to pre−recession levels, the chances of the federal funds rate creeping up – and mortgage rates along with it – increases. But there’s time to take advantage of a low rate and reduce your monthly mortgage and potentially save big over time.
Five Reasons You Should Refinance Now
Interest Rates Are Low – It’s a great time to borrow money. The Federal Reserve, which regulates the nation’s financial institutions, has indicated that interest rates will likely remain low for the time being. But this won’t last forever.
Home Values and Appraisals – Prior to 2013, homeowners who attempted to refinance experienced challenges due to home appraisals and home values coming in too low to be able to qualify for a refinance loan. Since 2008−2009, home values have increased substantially and many home owners who did not qualify for a mortgage refinance previously (due to appraisal/home values) will not have the same home value challenges in many instances.
Mortgage Insurance Has Decreased − Earlier this year, the Federal Housing Administration announced it would reduce the mortgage insurance premium rate charged on FHA−backed loans from 1.35 percent to 0.85 percent, which some estimates suggest will result in an average savings of $900 a year for new homebuyers and anyone refinancing a house. It was a decision designed to spur home buying, but it’s good for homeowners who want to refinance as well. Another reason to consider refinancing, especially if you have an FHA loan: You may be able to refinance from an FHA loan to a conventional mortgage and remove your mortgage insurance payments altogether, reducing your monthly payment even more – if you have enough equity in your home.
Family Situation – There is no “rule of thumb” when it comes to the interest rate drop justifying a refinance, mostly due to the many factors that can create a reality where a refinance can benefit a family financially. For example, when a household switches from dual to single−income, it may be necessary to refinance to a longer term to lower the payment based on the change of income status. Not only do lower rates save money, but also some families need to refinance to a lower rate, as well as a new 30−year fixed term to maximize cash flow for their household, based on budgeting for a lower household income. In addition, many Americans find themselves in consumer debt due to circumstances beyond their control, and a refinance that did not make good financial sense two years ago may now be very appealing, based on their household budget and low mortgage rates.
Updated Regulations – Lending guidelines have eased somewhat over the past couple of years, and the housing market has shown more signs of life than in previous years. In recent years, many newly implemented regulations have created challenges for some homeowners who might have attempted to refinance two years ago. Since that time, however, the lending institutions and mortgage industry have had sufficient time to implement and learn how to operate within the regulatory environment, which has created more accountability for lenders. Also, lending guidelines slowly continue to improve, making mortgage qualification and refinance easier to understand and more accessible compared to recent years.
Contact your nearest location to speak with one of our mortgage specialist to see how refinancing your mortgage could benefit you.