As mortgage rates drop, homeowners seek refinancing savings
Mortgage rates, which keep falling to record highs, have finally caught the attention of homeowners – and in a big way.
Refinance loan applications are on the rise as more homeowners heed the advice that they can potentially save hundreds of dollars per month by swapping their existing mortgages for new ones with greatly reduced prices.
Lenders are receiving more than twice as many refi loan applications as they were last year around this time, according to a trade group.
The owners are racing to refi
Overall, mortgage applications rose 5.1% in the week ending July 10, led by a 12% increase in demand for refinancing loans, the Mortgage Bankers Association said on Wednesday. , or MBA. Refinancing requests are up 107% from a year ago.
The surge in refi requests came as mortgage rates fell to new all-time lows in multiple surveys. The MBA says its data shows the average for a 30 year fixed rate mortgage fell to a record 3.19%. Rates have fallen dramatically since the end of March, when the average was 3.82%.
Separate surveys show that the rates on 30-year loans are looking even better : on average 2.98%, according to the mortgage company Freddie Mac; and as low as 2.89%, on average, according to Mortgage News Daily.
“The cut in rates led to a surge in refinancing activity to the highest level in a month, with refinancing loan balances also reaching a record high last in March,” says Joel Kan, vice-president. Associate President of MBA Forecasts.
Mortgage rates have fallen as America’s growing coronavirus disaster prompted investors to load up on treasury bills to keep their money relatively safe. Bond prices have risen, their interest rates have fallen, and so have mortgage rates.
Refinancing is often a matter of course
More than 16 million homeowners are struggling with mortgages approaching 4% and could cut their monthly payments by an average of $ 283 through refinancing, mortgage data firm Black Knight recently reported.
“A mortgage refinance can offer a lower payment that is attributed to an extension of the term to 30 years, a lower principal balance than the original loan and a lower interest rate,” says Jerry Anderson, vice president of residential loans at Alliant Credit Union.
According to Black Knight, you are a good refi candidate if you have a 30 year loan, you could reduce your mortgage rate by at least three-quarters of 1 percentage point (0.75), have a credit score of 720 or higher, and have at least 20% equity in your home, says Black Knight.
It is possible to get a refi rate of less than 3%, Anderson says, but you’ll have to meet the credit, equity, and income requirements – and have good timing.
“The rate below 3% that you see today may not be here tomorrow. Mortgage rates are influenced by the United States and the global economy. Actions and Federal Reserve news that may be damaging to the immediate or future economy have an impact on rates, which can change. everyday, ”he said.
To get the lowest rate available, shopping is essential. Get refinancing offers from at least three lenders and compare them to find your best deal.
Home buyers’ borrowing slows down
Refinancing requests jumped to 64.2% of all mortgage activity last week, according to the MBA, from 60.1% a week earlier.
It was like requests for loans to buy a house dipped 6%.
“Purchase requests fell during the week, but remained 15% higher than a year ago,” Kan says. “Purchasing activity remains relatively strong, despite persistent economic uncertainty and high unemployment caused by the ongoing pandemic.”
Homebuyers have returned to the housing market “in a flood,” but many sellers are reluctant to put their homes on the market during the current health crisis, says Danielle Hale, chief economist at Realtor.com.
“This imbalance created competitive market conditions for buyers and pushed up home prices, up 6.2% in our most recent weekly data,” Hale says.
If you are looking for a home and are lucky enough to find something in your price range, you are also going to be making comparisons for your loan. mark a lower mortgage rate which will reward you with significant monthly and lifetime interest savings.
Take a similar approach when it comes to purchasing home insurance. Go online, get several home insurance quotes, and examine them side by side to get the right coverage at the right price.