In January of this year, the Federal Reserve lowered interest rates. By the last week of January, some lenders were offering mortgage rates at 3.2%. These lower rates had some current homeowners to refinance their home loans. In February, refinance home loans made up about 48% of the loans processed for that month.
I know the idea of buying or refinancing a home during this time of uncertainty may seem a little strange or unlikely. However, if you are a homeowner making your monthly mortgage payment, you might think about taking advantage of the lower loan rates. Some questions you might want to think about are:
- How much can I afford?
- Will this refinance lower my monthly payment and how much will my monthly payment decrease.
- Will refinancing help or hurt me in the long run? Just because the rate is lower does not always mean you will qualify.
- What is my credit score? The higher the credit score is, the lower the interested rate. We might also have to consider the high unemployment rate; lenders might have to require a higher credit score to qualify for a mortgage loan.
- What types of mortgage loans are offering a lower rate? The type of mortgage loan and the length of the loan might determine if you will be saving money or paying a lower monthly payment. As we all know, a longer loan term will have a lower monthly payment. But, sometime we may want a shorter time to pay the loan off quicker and to pay less interest. I would suggest asking a loan officer to show you the difference between a 15, 20, and 30-year mortgage.
The take away: Will refinancing my home be worth it in the long run? Will it help me overall financially? If you feel that a refinance will be worth it, then go for it; if not, well, at least you have made a smart financial decision for you and your family.
Evette Baker, Director of Financial Capability
