Record-low mortgage rates won't last — refinance before it's too late

Mortgage and refinance rates have consistently hit record lows since the Federal Reserve made emergency cuts amid the coronavirus pandemic. With current interest rates as low as they are, it's no surprise the housing market is "strong" mortgage and refinance applications are on the rise.

According to data from the Mortgage Bankers Association (MBA), refinances counted for 66.7% of all mortgage application activity as of reporting. The total number of mortgage refinance applications is also 80% higher than at this time last year.

If you're still on the fence about making any real estate moves right now (refinancing or otherwise), read on to learn more about navigating refinance rates and the process in general. But don't wait too long to make a move — mortgage rates won't be at historic lows forever.

What is the lowest mortgage rate now?

Here's where average mortgage rates currently stand, according to Freddie Mac:

• 30-year fixed-rate: 2.81%
• 15-year fixed-rate: 2.32%
• 5/1-year adjustable-rate: 2.88%

The lowest mortgage rate right now is the 15-year fixed-rate — but that's not the only notable number listed above. The rate for a 30-year home loan is 0.09% lower than it was this time last month and 0.97% lower than at the same time last year. However, both are taking sharp dives.

3 REASONS TO REFINANCE YOUR MORTGAGE IMMEDIATELY

Why should I refinance my mortgage now?

There are many advantages of refinancing into a low rate. But that's not the only plus of a refinance. Here are several benefits of refinancing your mortgage now.

1. Lower monthly payments
2. Avoid a new "adverse market" fee
3. New loan terms
4. Potential savings

1. Lower monthly payments: Many homeowners find that refinancing is a great way to lower their monthly payments and the savings they receive from refinancing gives them the freedom to tackle other financial goals.

2. Avoid a new "adverse market" fee: Earlier this year, Fannie Mae and Freddie Mac, the two government-sponsored agencies that by the majority of real estate loans in the United States, announced that they will assess a new “adverse market” fee on all the refinance loans they buy. This fee will be equal to 0.5% of the loan amount and will be added into the borrowers' closing costs when they refinance.

The fee is officially scheduled to begin on December 1, 2020. However, many mortgage lenders will start adding the fee into homeowners closing costs soon, as it also applies to any mortgages that are delivered to Fannie and Freddie after that date. With that in mind, if you would like to refinance without having to pay this fee, it might be best to do so sooner rather than later.

3. New loan terms: Refinancing gives you an opportunity to change your current mortgage loan repayment terms (you're essentially replacing your old one with a new one).

4. Potential savings: Part of deciding whether it makes sense to refinance is figuring out how much you could stand to save. If you would like to get a jump on your savings calculations, use an online refinance calculator to see just much you could save on your monthly payment.

REFINANCE VS. LOAN MODIFICATION: WHICH IS BETTER?

How do I get a mortgage refinance?

Keep in mind that the process of refinancing is much the same as taking out a new home loan. In this case, you're simply taking out a new loan and using it to pay off your old one. In order to do that, you'll fill out a loan application, submit paperwork to your lender, and go through the underwriting process. Once your application has been approved, you'll fill out more paperwork to close on your new home loan.

That said, just like when you took out your home loan in the first place, you will have to pay closing costs in order to refinance. Since refinancing does it come with an upfront cost, it may not always make financial sense to do so. For example, if you don't plan to stay in your home for very long, you may not be able to break even on the cost of the refinance before you move.

WHY IT'S A GOOD IDEA TO REFINANCE YOUR MORTGAGE WHILE RATES ARE LOW

The bottom line

From a historical perspective, mortgage rates are currently at record lows. However, there's no guarantee that they will last, which means that if you're thinking of refinancing, now might be a perfect time.

That said, whether you're a candidate for restructuring your home equity will depend on your unique financial circumstances. To that end, your first step should be to talk to a lender who can give personalized advice.

HOW TO GET THE BEST MORTGAGE REFINANCE RATES