Historically Low Mortgage Rates Are A Golden Opportunity
You hate to tell someone that this could be a “once in a lifetime opportunity” but in the case of mortgage rates that statement may very well hold true.
Home buyers and current owners who want to refinance their homes should take note of a critical line that was recently crossed – the interest rate on thirty-year fixed mortgages has dropped below five percent for people who have very good credit. Coupled with an $8000 first time home buyers credit from the federal government, things are suddenly looking a lot better during this spring home buying season.
Rates Have Been Dropping Since November
Interest rates began their gradual decline last November when the Federal Reserve decided to push down mortgage rates. Moreover, last week the Federal Reserve promised to spend as much as $1.25 trillion to buy mortgage securities this year. The Fed is also purchasing long-term Treasury bonds in a bid to push down rates on those securities, whose valuation affects mortgage rates.
For the person who has a fixed rate home loan of 6% and an outstanding balance of $200,000, refinancing at 4.7% could see their monthly mortgage payment drop from $1199.10/month to $1037.28, a savings of just over $160/month or about $1940 a year.
Closing Costs and Your Loan
Keep in mind that if you choose to refinance, closing costs may apply. When rates were higher, some lenders absorbed or reduced these costs but the trend today is for homeowners to shoulder at least a part of those costs. This means that it could take a year or two for you to realize savings with your new mortgage, but that shouldn’t be a problem for the person who plans to stay put for the long term.
No one is quite certain for how long mortgages will stay at historically low rates, though some predict that they should last through the summer. Most likely by next spring rates will begin to climb as the full force of the federal governments multi-trillion dollar spending spree kicks in. When that happens mostly everyone agrees that inflation will return, sending interest rates higher perhaps for many years.
So if you’re planning to buy a home or refinance your current mortgage, you’ll want to act as soon as possible. Oh, by the way, make sure that you check your FICO score first to see if you’ll qualify for the best loan available.