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Last updated on December 26th, 2022 at 09:35 pm
In recent months, many Americans have taken advantage of the record low mortgage rates and refinanced their home.
Homeowners were able to drop their monthly payments and reduce total interest costs when the mortgage rates fell, just by applying for a refinance loan to pay off their existing mortgage balances.
However, the demand for new mortgage loans has fallen slightly in the past few weeks, as the rates have started rising up.
Before you decide to Apply for a New Loan, here's What you need to know.
Even if the mortgage refinance rates have climbed up slightly, they are still lower than the pre-pandemic levels.
The average interest rate on a new 30-year mortgage loan was above 3.50% in January 2020. Many borrowers had loans rates close to or even above 4.00% when they obtained loans in 2019 or before.
While refinance rates are revolving in the low 3% range, so unless you obtained a mortgage or refinanced around the pandemic, you have a very good chance to qualify for a refinance loan at a rate well below what you’re paying on your home loan currently.
Mortgage rates may stay low for a while but the possibility of the rates dropping again, is bleak, they could just as easily be climbing upward too.
No one can really predict for sure what’s likely to happen. So while you wait for refinancing hoping that rate could drop again, you might end up regretting it.
If the rates rise, you could miss out on the chance to reduce the cost of your home loan.
The key factor in determining whether you should refinance or not is your personal financial situation.
- Are you savings by refinancing? You can compare the payments and total interest costs of your current loan with a refinance loan to determine if it is beneficial. And it will also help you reduce your monthly bills and repayment expenses over time.
- The time period you plan to have the home? The closing cost while refinancing can total as much as 2% to 6% of the cost of your loan. If your interest rate reduces, the savings can make up for this initial upfront cost. But since it will take time for the savings in your monthly payment to cover the expense, make sure you’ll be in your home before refinancing.
- Qualifying for competitive interest rate Do you have good credit, a stable job, and enough income to pay off the loan in order to refinance at the best rates is what the lender will check. If not then you stick with your current loan and work on improving your scores.
Make the best choice by taking all of these factors into account.
Taking action today is crucial, whether you’re wanting to refinance and cut your mortgage payment or you’re ready to purchase a new home.
Reference Source: The Ascent
