Is this still a good time to refinance a mortgage?
Is now still a good time to refinance a mortgage?
Yes. Thank you for reading.
But seriously, mortgage rates remain super low for now, though experts don’t expect that to last much longer. A survey recently conducted by Bankrate showed that many homeowners haven’t refinanced, even though doing so could save them money. Black Knight found in its own survey that nearly 20 million Americans were passing up the opportunity.
If you have a mortgage and haven’t refinanced since the coronavirus pandemic caused rates to drop to historically low levels, you should seriously consider revamping your loan before rates start to rise again. Otherwise, you could miss the window for savings.
If this applies to you, here are some key things to keep in mind when it comes to refinancing in the current mortgage market.
Low rates won’t last forever
Although 2021 started off with rates hovering near their 2020 records, most mortgage industry watchers think interest will be on its way up again soon.
“We’re going to see a ton of stimulus out of Washington,” said Jim Sahnger, a mortgage planner at C2 Financial Corp. in Jupiter, Florida. “It’s going to be hard to keep a lid on interest rates where they’re currently at.”
In 2019, mortgage rates were mostly in the 4% range, but they fell into the 3s and even 2s during 2020. That made mortgage refinancing an attractive option for a huge swath of borrowers – even those who took out mortgages with very low rates by 2019 standards.
As rates start to rise again, refinancing will make financial sense for fewer people. For now, though, you probably stand to save if you opened your current mortgage any time before 2020.
Jumping on a refi now is especially important if your mortgage has a rate in the 4s.
“It’s a big deal when it comes to people who only benefit from interest rates under 3,” Sahnger said. For those people, “It’s a great time to take advantage of where we’re at.”
Lenders whittle down backlogs
As rates took a nosedive early in the pandemic, many mortgage lenders saw a flood of refinance applications roll in, which tied up their processing abilities and resulted in closing delays for many borrowers.
Mortgage applications usually provide for a 30-day rate lock, but with some lenders taking 60 days or more to close during the early rush, those delays quickly became costly for borrowers. Many wound up having to pay extra fees to extend their lock or eventually settled for a different interest rate than they were originally quoted.
Now, Sahnger said, lenders have mostly whittled down those backlogs, so closing is happening more efficiently again. The result is less risk and lower costs for applicants.
“You just have to be realistic about how long you’re going to lock your loan for,” Sahnger said.
Bottom line
Now is a great time for many people to refinance, and the window for savings could be closing on many borrowers before too long.
If you haven’t refinanced in the last year, it’s worth looking around to see how much you might save. Be sure to calculate all your costs and consider how much you’ll need to save to make a refi worth it. And, as always, you’ll want to shop around and compare multiple loan offers before starting the application process. Otherwise, you may wind up leaving money on the table.