Do not assume that refinancing will not be profitable.
- Mortgage refinance applications are down 83% from a year ago.
- Although it may seem like a bad time to refinance, it could be a good time for you.
When mortgage rates fell to record lows in the second half of 2020, many homeowners rushed to swap their existing loans for new ones. But over the past few months, demand for mortgage refinance has dropped significantly. And for the week ending July 23, mortgage refinance volume was 83% lower than the same time in 2021.
Given the way mortgage rates have risen recently, this is not shocking. But while refinancing may not have the same appeal these days as it did in the summer of 2020, or even the summer of 2021, some homeowners could still benefit from going this route.
You could still save money
As of this writing, the average 30-year refinance rate is just over 5.6%. When we compare today’s rates to rates that were available a year ago, the thought of getting a new mortgage may seem unappealing.
But let’s put today’s refinance rates into perspective. There was a time when the average refinance rate over 30 years was 7%, 8% or more. In fact, today’s mortgage rates are far from the highest borrowers have ever experienced. And it’s important to keep that in perspective when deciding if a refinance is worth it.
Also, your credit may be weak when you signed your original mortgage, so the rate you pay is higher than current refinance rates. If so, getting a new home loan might make sense.
Finally, if you signed an adjustable rate mortgage whose interest rate is going up, you may want to refinance it into a fixed rate mortgage. This could help you avoid a scenario where your home becomes increasingly difficult to afford.
You may want to leverage your capital
Right now, homeowners across the United States are sitting on record levels of equity due to soaring home prices. If you need cash, it’s worth looking into a cash refinance. This type of refinance allows you to borrow more than your existing mortgage balance, so you get a cash payment that you can use for whatever purpose.
Although you will pay more to refinance a mortgage now than you would have last year, you could pay well over 5.6% if you take out a personal loan to raise the money you need. And chances are you’ll also pay more for a home equity loan or HELOC. So while today’s refinance rates aren’t the most competitive, compared to other borrowing options, they are quite affordable.
You might assume that now is not the time to refinance because rates are rising. But in reality, today’s refinance rates aren’t the bad deal you might think they are. Now, if you have a 30 year fixed rate loan at 4% interest and you don’t need to take money out of your home, then refinancing is a decision you might want to skip. . But if you’re paying a high interest rate on your mortgage, your loan isn’t fixed, and you need cash, refinancing might be a very smart move right now.
The Best Mortgage Lender in Ascent in 2022
Mortgage rates are at their highest level in years and should continue to rise. It’s more important than ever to check your rates with multiple lenders to get the best possible rate while minimizing fees. Even a small difference in your rate could reduce your monthly payment by hundreds.
This is where Better Mortgage comes in.
You can get pre-approved in as little as 3 minutes, without a credit check, and lock in your rate at any time. Another plus? They do not charge origination or lender fees (which can reach 2% of the loan amount for some lenders).
Read our free review