Is Now the Best Time to Refinance Your Home?
With consistently low interest rates throughout the year, is now the best time to refinance your home?
This past year, mortgage rates surprised experts by being some of the lowest since 2016. For most of the year, mortgage rates have hovered around 4% APR , give or take a few decimals, according to NerdWallet.
For potential buyers, now is a good time to lock in on low mortgage rates (though the steep price of housing can still deter first-time homebuyers.) But what do historically low interest rates mean for current homeowners?
The economy has been meeting investors' expectations, and with relative stability, mortgage rates have been consistent. During this time, many homeowners consider refinancing their homes to receive a more favorable interest rate.
As Investopedia explains, refinancing your mortgage means paying off an existing loan and replacing it with a new one. While one reason is to obtain a lower interest rate, some homeowners also refinance to shorten the term of their mortgage or convert it from a fixed-rate to an adjustable-rate loan (or vice versa).
Refinancing is also an attractive option if you want to tap into home equity to finance a large purchase or to consolidate debt. Aside from your primary residence, you can refinance your vacation home or an investment property for the same purpose.
Usually, refinancing a loan can cost between 3% and 6% of its principal, and you still have to go through the process of filling out an application and having an appraisal. While this might seem excessive, a thorough title search and appraisal can help you and the lender determine if refinancing makes sense for your situation.
If you do want to refinance to secure a lower interest rate , the experts suggest only doing so if you can reduce your interest rate by at least 2%.
Refinancing your home can secure lower interest rates.
A look at the numbers
Many homeowners have already taken advantage of the opportunity to refinance and secure a lower interest rate for years to come. For the week of Dec. 18, 2019, the Mortgage Bankers Association® reported the Refinance Index was 135% higher than the same week one year ago.
Though applications to refinance decreased 7% from the week prior, there's no denying that the market is in a different place than it was a year ago. Of course, refinancing may not be the best choice for everyone.
Closing out the year and looking ahead
Forbes summarized predictions from top economists at Freddie Mac, Fannie Mae and the MBA that the average for the year will close out between 3.8% APR and 4% APR. The good news is this trend is expected to continue into 2020 - and even to grow more favorable for homebuyers and homeowners alike.
There's still time to apply to refinance your home, but every situation is unique. Work with a trusted financial advisor to explore all your options to understand if refinancing your home makes financial sense.
The loan experts at Vectra Bank are ready to help. Answer a few simple questions about your current mortgage situation and we can recommend which loan* can work for you. Contact a local Vectra Bank representative today for more information and help with refinancing your home while interest rates remain low.
*Loans subject to credit approval. Terms and conditions apply. See banker for details.
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