Las Vegas Review-Journal (Sunday)
Taking advantage of low mortgage rates
Interest rates have settled near their lowest levels in generations
Good news for homeowners who have not refinanced their home loans: Mortgage rates stayed about the same this week.
That means mortgage rates have settled near their lowest levels in generations. The 30-year fixed-rate mortgage has hovered just above 3.5 percent for six weeks. Meanwhile, some people have been on vacation or paying attention to the Olympics and political tomfoolery. The low-interest rates are just catching folks’ attention.
“It’s getting on people’s radar,” said Jim Sahnger, mortgage planner for Schaffer Mortgage, in Palm Beach Gardens, Florida.
So if you applied to refinance your mortgage last week, you weren’t alone. Refinance applications jumped 10 percent this past week, according to the Mortgage Bankers Association. It’s no coincidence that mortgage rates hit their second-lowest level of 2016 last week, too. And they’ve stayed there.
THIS WEEK’S RATES
The benchmark 30-year fixed-rate mortgage remains unchanged this week, at 3.56 percent, according to Bankrate’s weekly survey of large lenders. A year ago, it was 4.04 percent. Four weeks ago, it was 3.57 percent.
The mortgages in this week’s survey had an average total of 0.23 discount and origination points.
During the past 52 weeks, the 30-year fixed has averaged 3.88 percent. This week’s rate is 0.32 percentage points lower than the 52week average.
The benchmark 15-year fixedrate mortgage rose to 2.84 percent from 2.83 percent.
The benchmark 5/1 adjustable-rate mortgage rose to 3.04 percent from 3.01 percent.
The benchmark 30-year fixedrate jumbo mortgage fell to 3.58 percent from 3.62 percent.
The jumbo 30-year loan rate set a record low for the second straight week. Before last week, the record low was 3.64 percent on July 6.
VARIOUS REASONS TO REFI
Bankrate has gathered mortgage rate data every week for almost 31 years. In that time, the record low for the 30-year fixed was 3.5 percent, set in December 2012. There’s little difference between that record-low rate and today’s 3.56 percent average.
Sahnger said he’s been busy in the last few weeks, as he hears from clients who bought homes two or three years ago. Many of them made small down payments, so they pay for mortgage insurance.
Now their homes have increased in value. They have enough equity to refinance and get rid of mortgage insurance, or at least to reduce their mortgage insurance payments. At the same time, they’re getting lower interest rates.
Other borrowers want to do cashout refinances, Sahnger said. But this isn’t a repeat of the profligate days of the housing boom.
“I don’t see a lot of people who want to cash out to pay off credit-card debt or to buy jet skis; they’re pretty much being responsible,” Sahnger said.
ZERO-COST REFINANCES
When you refinance, you incur closing costs. But most lenders will offer a deal in which the lender pays the closing costs, and in return, you pay an interest rate that’s higher than rock bottom.
For example, your neighbor might pay all the closing fees out-of- pocket and get an interest rate of 3.5 percent in a refinance, while you pay zero closing costs and get a rate of 3.875 percent. If that’s lower than your current interest rate, your monthly payments will go down.
“If you’re bettering your situation, and it doesn’t cost you anything, it’s pretty much a no-brainer,” Sahnger said.
There is a problem with a no-closing-cost refinance: Your monthly savings are greater if you pay the closing costs and get a lower rate. If you plan to stay in the home for more than eight years or so, it’s usually cheaper in the long run to pay those closing costs and get the lowest rate possible.
Michael Moskowitz, president of Equity Now, a mortgage lender in New York City, recommends zero-cost refinances, too. He thinks interest rates might continue falling.
“Then you can refinance in six months again, and you don’t lose anything,” he said.” In my view, it’s a gamble that very much is a smart gamble.”