Is Now a Good Time to Refinance a Mortgage?

Is Now a Good Time to Refinance a Mortgage?

August 12, 2020

First it is important to discuss the record low interest rates. According to the latest market survey data on primary mortgages released by Freddie Mac on August 27, 2020, the 30-year fixed rate average fell to 2.91 percent. Last year around this time the 30-year fixed rate average was 4.14 percent. The 15-year fixed rate average has dropped 2.46 percent. Last year around this time the 15-year average was 3.68 percent. These current 30-year and 15-year mortgage fixed rates are the lowest levels in the history of Freddie Mac’s survey which goes back to 1971, almost 50 years ago.

Lower mortgage interest rates, high housing valuations coupled with record high individual FICO scores (the average FICO score hit a record high of 703 in 2019) make mortgage lenders more friendly to potential mortgage loan refinancers.

4 Questions Before Going to a Mortgage Lender

Given that now may be a good time to refinance mortgages, you might consider asking the following questions before applying for a new mortgage:

  1. What is the cost to refinance and how long will it take to get my refinancing costs back?
  2. Do I want to go from a 30-year fixed mortgage to a 15-year fixed mortgage?
  3. Do I want to simply refinance the current principal balance on my existing mortgage at a lower interest rate, or do I want to “cash out” and refinance for more than the current principal balance at a lower interest rate?
  4. Am I better off paying off the current mortgage rather than keeping the mortgage and perhaps taking on more mortgage debt?
  5. Should I pay a lump sum toward my current mortgage (e.g. $50,000 to lower payments or pay off my loan faster?

Check in with us and we can help you weigh the pros and cons of refinancing compared to other options such as paying off your mortgage or paying it down significantly with a lump sum (called recasting). There are other factors that we can help you consider such as your cash flow, access to "safe money" such as cash in your bank account, tax planning implications, and other uses for your money such as investing.