Are you still considering a mortgage refinance? Why you should act now

If you want to refinance your home, you may want to act now instead of waiting for a better time. (iStock)

Homeowners have an unprecedented opportunity to take advantage of historic low mortgage interest rates. But, if you're one of the millions who are putting off applying for a mortgage refinance until a "better" time, you might want to reconsider. While today's mortgage rates are sitting at year-over-year lows, they are trending higher.

In March 2020, the Federal Reserve instituted an emergency rate cut in response to the coronavirus pandemic, bringing interest rates near 0%. Since then, mortgage rates hit an all-time low with the 30-year fixed-rate mortgage hitting 2.65% in January 2021. The 15-year fixed-rate mortgage also hit a record low of 2.16%. To compare, rates the same week in 2020 were 3.65% and 3.09%, respectively.

At publication, the average 30-year fixed-rate mortgage is 3.04%, and the average 15-year fixed-rate mortgage is 2.35%, according to Freddie Mac. While today's mortgage rates are still lower than last year, now might be the best time to move forward on refinancing your mortgage if you want to take advantage of the lowest rates possible. You can explore your personalized refinance loan options by visiting Credible to compare rates and mortgage lenders.

If you're still on the fence about refinancing your mortgage, here are a few reasons you should consider deciding soon.


1. Today's mortgage rates are comparatively low

While current rates aren't a record low, they're close. The current mortgage rate for the 30-year and 15-year fixed mortgage is 0.27% and 0.45%, respectively, lower than last year. Today's rates are significantly lower than this time in 2019, when the average interest rate for a 30-year FRM was 4.17% and a 15-year FRM was 3.62%.

If you have an adjustable-rate mortgage, you could save by switching to a 15-year fixed rate which is currently offering lower rates.

To understand just how much you could save on monthly mortgage payments by refinancing now, crunch the numbers and compare refinance rates using Credible's free online tool. Within minutes, you can see what multiple mortgage lenders are offering.


2. Mortgage rates are trending upward

Today's mortgage rates are unlikely to remain this low forever, especially as the economy continues to rebound from the coronavirus pandemic. The federal economic relief and increased vaccinations are likely to improve the market even more in the coming weeks.

If you look at the average mortgage rate trends from the last year, you'll notice rates consistently rise and fall. However, the average lows are getting higher. Additionally, over the previous month, the average rate has increased each week.

Kiplinger projects the 10-year rate will increase from 1.5% to 2% by the end of the year and will likely influence mortgage rates as well.

Now may be a good time to refinance your home loan. Visit the Credible marketplace to see your prequalified rates and compare them to your current mortgage rate.


3. The unknown

One of the biggest reasons for acting sooner rather than later is the unknown. It's not improbable that new fees or costs could become part of a mortgage refinance. For example, as of December 2020, all new refinances (of home loans more than $125,000) cost an additional 0.5% to cover an adverse market fee set by the Federal Housing Administration. While no other fees have been announced, homeowners considering a loan refinance may want to take advantage of lower rates before any other potential changes arrive.

Consult your financial advisor if you're still unsure, then visit Credible to get in touch with experienced loan officers to get any other mortgage questions answered.


When a mortgage refinance might not make sense for you

Refinancing your mortgage might not be the best move for your personal finance situation. Some homeowners could lose money by opting for a home loan refinance. If you don't plan to stay in your home for at least the next five years, the cost to refinance will likely outweigh your savings. Additionally, if you have a low credit score or you don't have at least 20% equity in your home, you may want to hold off until your situation changes.

Lower credit scores mean you won't get the best rates, and if you have less than 20% equity, you may want to wait to refinance until you do have at least 20%, so you can avoid private mortgage insurance.

If you're still on the fence about whether refinancing your mortgage will work for you, use an online mortgage calculator to help you run some numbers and decide if it makes sense for your situation.

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