It is on record that the United States is among the many nations with powerful economies across the globe. However, just like many others, it has been hit hard by the COVID-19 pandemic. Nonetheless, the pandemic seems to have awakened a new trend of excitement for mortgage refinancing. The wave of excitement is supported by a drop of interest rates 0.5%, thanks to the Federal Reserve.
Refinancing your mortgage is a good idea. But when is the right time?
There have been dramatic and rapid refinancing activities over the last year. It is worth noting that throughout the first quarter of 2020, mortgage rates have been falling to the advantage of many homeowners who rushed to refinance their loans. However, this doesn’t mean that you can make a move any time.
Many people have this impression that the lowering of short-term interest rates by the Federal Reserve should lower mortgage rates. This is a misconception because various market factors regulate mortgage interest rates. Of course, borrowers with the best credit have the advantage of accessing the best rates.
Refinancing your loan is a good idea. However, the move should have some positive impact, for example, helping you reduce the payment period of your mortgage hence saving some money. “If you can shave one-half to three-quarters of a percentage point off your mortgage rate by refinancing, you should look into it”. This is according to the chief financial analyst for Bankrate, Greg McBride.
There are times when refinancing your mortgage may not be a good idea.
Just imagine owning your home, and having more money to put into owning it means you are debt-free. This is the confidence many homeowners to be are looking forward to. However, the need to buy a new car, remodel your living room, or pay off your credit card bills are not considerations for refinancing your mortgage.
Borrowers are strongly recommended to engage a mortgage professional to help them define and realign their financial needs, which suit their current and future interests.