For the first time in many years, mortgage rates are dropping, making it an ideal time to buy a home or refinance your current one. Ultimately, this shift has created a massive surge in refinance activity, with a 27% increase in refinance applications, the highest in three years. While experts predicted an upward trend for the majority of 2019 after peaking at 5% last November, rates have stayed low, with the 30-year-fixed mortgages dropping as low as 3.82% nationally. However, things are always subject to change.
Knowing If You Should Refinance
Those most impacted by this shift in the market are homeowners eligible for refinancing. According to Reuters, this is roughly 6.8 million people in the United States, of which a significant amount are new homeowners (as of the last 12 months). According to Black Knight, a mortgage analytics data company, borrowers could save up to $268 a month by refinancing. While things have been changing rapidly and some homeowners may want to seize the chance at refinancing, a general rule of thumb is to wait until they drop a full percentage point before making the jump. For many homeowners, this could mean saving thousands of dollars per year, especially in heavily taxed areas in the U.S.
Those Already Taking the Jump
South Carolina, Texas, Tennessee, California and Illinois have all seen a steady rise in application activity, with spikes beginning as early as April of this year. Reuters also reported that a significant percentage of millennial buyers are doing cash-out refinancing, meaning homeowners remove a portion of equity from their home while adjusting their loan rate. However, experts recommend this only if it’s used towards something worthwhile, like college tuition or investment properties (not vacation or something similar).
10, 15 and 30 Year Fixed-Refinance Rates
As of June 19th, 2019, numerous refinance rates continued to recede, which includes 10, 15 and 30-Year Refinance Rates. That means now is still a prime opportunity to refinance or buy a home for many people. As for specific figures, the 30 year fixed-refinance rate is down to 3.97%, meaning you’ll pay $475.69 per month in principal and interest for every $100,000 you borrow. The 15 year fixed-refinance rates has now decreased to 3.23%, meaning monthly payments will cost around $702 per $100,000 borrowed. While it may initially present a challenge for your monthly budget, there are advantages, including saving money over the life of the loan and building equity very quickly. For 10 year fixed-refinance rates, the average has gone down to 3.24%, with monthly payments sitting at $978.12 per month. While this is a whopping monthly payment and commitment, you will still pay less interest over the life of the loan as compared to a 15 year fixed-refinance loan.
Where Are Rates Headed?
It’s difficult to say if these downward trends will continue, as this market is susceptible to change all the time. However, it may be in your best interest to refinance now while rates remain low. And as always, it’s recommended to stay in tune with rates at all times so you can make the best decision possible as a homeowner.