Millions of homeowners can lower mortgage payments by refinancing right now
Mortgage refinancing can help millions of homeowners to reduce the amount of their monthly payments and save money. Here's what you need to know. (iStock)
Coronavirus has profoundly impacted the economy, but real estate prices have largely held steady — as this recession isn't driven by a collapse in the real estate market as the 2008 financial crisis was. In fact, homeowners are actually taking advantage of lower rates and considering many reasons to refinance their homes, though mainly to save money.
With home values remaining stable in most parts of the U.S. and lower rates (which are at or near record lows due to the Fed's efforts to bolster the economy), millions of homeowners can potentially reduce their monthly mortgage payment — and total costs — by refinancing their homes today.
To explore this option, as well as other mortgage refinance loans, visit Credible to compare rates and loan terms today.
Borrowers looking to refinance have several options, including refinancing into a new 30-year term or opting for a 15-year mortgage instead. Choosing a 15-year mortgage would allow many homeowners who have been paying down their loan to avoid extending their payoff time, while also capturing the lowest possible rates in today's low-interest market.
What are today's mortgage rates?
According to Freddie Mac, the U.S. weekly average mortgage rate for August 27, 2020, was 2.91% for a 30-year fixed-rate mortgage; 2.46% for a 15-year fixed-rate mortgage, and 2.91% for a five-year adjustable-rate mortgage.
That marks a dramatic drop compared with last year at this time when the average rate for a 30-year mortgage was 3.60%; for a 15-year was 3.05% and for a 5/1 ARM was 3.36%.
With a lower interest rate, it's a wise idea to consider refinancing your home to significantly reduce your mortgage payment. To see just how much you could save over time, plug your information into Credible's free online tools now.
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Rates have continued to fall as the Federal Reserve has cut its benchmark interest rate in response to the novel coronavirus — and interest rates on home loans have loosely followed the 10-year Treasury which is also hitting new record lows. Some expect today's lower rates to fall further, although there's no guarantee so those hoping to refinance may not want to wait on the sidelines as passing up the chance to refinance at rates near historic lows could be a serious mistake.
With Credible, you can compare multiple mortgage lenders at once and see what kind of refinance rates you qualify for within just minutes. Plus, it doesn't impact your credit score.
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How much does your house payment go down when you refinance?
Homeowners across the country are looking at a golden opportunity to make their homes more affordable with a lower monthly payment through a mortgage refinance loan. In fact, real estate data firm Black Knight reports that 90% of homeowners with equity in their homes had mortgage loans with rates above the prevailing market average in early July. And as many as 75% had rates above 3.5%, which is 1% above the current average interest rate on a 15-year mortgage loan. Fannie Mae, on the other hand, estimated that close to 60% of all outstanding loan mortgages could be lowered by at least half-a-percentage point.
Buyers who see a 1% drop in their mortgage by refinancing could save substantially on their borrowing costs. A borrower with a 30-year $300,000 mortgage at 3.5%, for example, would pay $1,347 per month for the life of the loan and would incur a total cost of $484,968. If that same borrower instead refinanced to a 15-year $300,000 mortgage at 2.51%, monthly payments would be a bit higher at $2,002 but the total cost of the mortgage would be just $360,320. The 15-year loan would enable the borrower to become debt-free in half the time and save over $120,000 in interest.
If you're looking to both save on interest and lower your monthly mortgage payments, refinancing to a loan with the same repayment term could achieve both objectives. A $300,000 30-year loan at 3.88%, for example, would have monthly payments of $1,412 and a total cost of $508,165. For a borrower who could obtain the same loan at today's average rate of 2.88%, payments would come down to $1,245 monthly and total interest costs would fall more than $50,000 to $448,373.
To see how much a refinance reduces your payment and to better understand your total cost savings, enter your current loan amount into Credible and crunch the numbers instantly.
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Millions of homeowners could save with today's low rates
Although today's mortgage rates present a historic opportunity to reduce home borrowing costs for millions of homeowners, not everyone is in a position to refinance.
Before moving forward, you'll want to make sure you plan to remain in your home long enough for the savings associated with refinancing to cover the closing costs you'll incur during the process. It's also important to make sure you're in a good financial position to apply for a new home loan at a competitive rate.
If you can fulfill these requirements, visit Credible today to compare rates and home loan terms to see if refinancing your mortgage makes sense for you. You may very well be one of the millions of homeowners who can save by securing a new home loan, so shopping around to find out is worth the effort.
Refinance calculators can also be helpful to determine if a home loan modification — like a refinance — makes sense for you. Consider the cost of your refinance, how much it will lower your monthly bills, and how long it will take you to recoup the cost of your refinance.