Most homeowners find their mortgage payment is their largest expense, so it may make sense to consider taking advantage of historically low interest rates. The Federal Reserve cut interest rates earlier this year to help a floundering economy caused by the COVID-19 crisis and mortgage rates continue to drop.

 

In the first week of August, the average interest rate on a 30-year fixed-rate mortgage fell to a record low of 2.88%, according to Freddie Mac. That's the lowest level in the nearly 50 years of the mortgage giant's survey. The 15-year fixed-rate mortgage dropped to 2.44%. 

  
   

Why refinance now

   

Thousands of homeowners are capitalizing on the current low interest rates and refinancing now; experts are projecting that the refinancing volume will hit $6 trillion this year, more than twice the average yearly volume. 

   

If you can save at least half a percent on your mortgage, you could save thousands of dollars over the term of your loan. In addition to lowering your monthly payments, there are other benefits to refinancing, such as:
 

• Switching from an adjustable rate mortgage to a fixed rate mortgage for more predictable payments

• Eliminating private mortgage insurance (PMI) costs

• Shortening the term of your mortgage so you can pay it off sooner
   

You may also want to consider cash-out refinancing. Traditional refinancing replaces your existing mortgage with a new mortgage for the same balance, but at a better interest rate. A cash-out refinance loan replaces your existing mortgage with a new loan for more money than you owe on your house. You receive the difference in cash and can apply that money to home improvements, debt consolidation or other financial needs.
     

Keep in mind that since refinancing means taking out a new mortgage, you will be required to pay associated costs such as points, fees and closing costs. You may be able to wrap these costs into the overall loan, but you still want to be sure that refinancing at a lower interest rate will exceed those costs. Check out our Refinancing Calculator to be sure refinancing makes sense for you.

   

Ultimately, refinancing can help ease your largest financial burden, save you significant costs over time, and help secure your future. But it’s not right for everyone.

   
   

Why refinance later

   

It’s a bit of a Catch-22 – the interest rates were lowered to help drive an economy that has been deeply impacted by the COVID-19 pandemic, but that uncertain economy may also be a reason to wait on refinancing.

   

If you have any concerns that you might lose your job, starting the process of refinancing may be a wasted effort. You will likely not qualify for a loan if you are no longer employed. In fact, lending requirements are now stricter than before, as banks are concerned about recouping their loans. It’s possible that you may not qualify for refinancing right now; even if you qualified at the beginning of the year.

   

Bottom line, if you are worried about being laid off, have a low credit score, inconsistent job history or have been late with your mortgage payments, refinancing may not be in the cards for you right now.

   

The good news is that experts predict these low interest rates will be around for a while, so there’s no need to rush. If you’re not sure, talk to one of our knowledgeable home loan consultants who can help guide you.

   

If you’re considering taking advantage of today’s historically low interest rates and refinancing your home, Valley is here to help.  Check out our refinancing resources on our website, use our Refinancing Calculator, or contact our refinancing experts today.