Mortgage rates have fallen to unbelievably low levels in 2020 thanks to the economic chaos unleashsed by the coronavirus. Thirty-year mortgages way below 3% have become the norm as rates have plunged more than a full percentage point below last year's levels.
If you’re a homeowner with an existing mortgage and you haven't refinanced yet, you need to do that — like, right now. More than 19 million mortgage holders are ripe for a refi, according to a recent report.
Refinancing at today’s record-low rates could save you a few thousand dollars a year in interest, and tens of thousands of dollars over the course of your loan.
If you think it might be time to replace your mortgage with a new one, here are four things to know so you'll get the most out of your refi.
1. You should be certain a refi is right
Before you commit to a refinance, there are a few important things to consider. Today’s basement-dwelling mortgage rates are irresistible, but the terms of your existing mortgage might include loan conditions that would make refinancing a bad call.
Some mortgages carry a penalty for early repayment, especially during the first few years. You also could run into legal complications if you took advantage of a local government grant program, like one for first-time buyers.
Before you start looking at refinance loans, read your mortgage documents carefully to be certain you won’t get dinged with exorbitant fees.
You also need to make sure a refinance now won’t end up costing you more in the long run.
If your current mortgage is for 30 years and you’ve already paid off half of it, refinancing into a new 30-year fixed-rate mortgage could cost you tens, or possibly hundreds of thousands of dollars in additional interest. It might be smart to go with a 15-year loan instead.
2. It's good to talk with a pro
The best way to be sure refinancing is the right decision is to consult with a professional. An online financial planning service will give you top-of-the-line financial advice without the high fees.
In addition to providing you with advice on your refi, a certified financial planner can help you create a retirement savings plan that’s tailored to work with your mortgage.
That way, once your home loan is fully paid off you can rest easy knowing you’ve already got a chunk of change stashed away for your golden years.
A simple 30-minute call can get you thinking about your financial goals and priorities — and how a refinance can help you achieve them.
3. You need to compare rates to find the right loan
Some 19.4 million homeowners are sitting on old mortgages with rates so high that they could save an average $308 a month by refinancing, the mortgage technology and data provider Black Knight reported in early December.