How to Take Advantage of Lower Mortgage Rates. The Fed has lowered again and you should take advantage of it!
Fixed Rate Mortgages
The reduction in interest rates by the Federal Reserve doesn't necessarily result in drastically lower rates for fixed-rate mortgages. This is because bond rates, not the fed rate, drive fixed mortgage rates. However, rates are currently at one of the lowest levels in years and you should take advantage of them now. Call me at 253-315-5580.
You've probably heard that it only makes sense to refinance your mortgage if the new interest rate is at least two percentage points lower than your current rate. Forget this piece of advice. It doesn't apply in today's financial markets where there are many options for financing your home, including fixed mortgages with terms of 15, 20, or 30 years; five- and seven-year balloon loans; and a wide variety of Adjustable Rate Mortgages (ARMs). Even if you can't lower your monthly payment by refinancing, it might make sense if you can give up the insecurity of an ARM for a fixed rate.
Adjustable Rate Mortgages (ARMs)
Adjustable mortgage rates are affected more by changes in the fed rate because these types of loans follow short-term interest rates, such as Treasury bill rates, which follow the fed rate.
When does an ARM make sense? If you're planning to stay in a home for only a few years and you can get an ARM for significantly less than a fixed rate mortgage, you may come out ahead by going for the ARM. Adjustable rate mortgages are also popular with people who may have difficulty qualifying for a loan at higher fixed interest rates. The lower ARM rate lowers their monthly payment, making it easier for them to qualify for the loan.
If, on the other hand, you already have an ARM and you plan to stay in your house for the long-term, consider locking in at today's attractive fixed mortgage rates.
Home Equity Loans
Home equity loan rates follow the prime rate, so they are directly affected by the Fed's interest rate increases and decreases, although they are always higher than regular mortgage rates.
When interest rates are low, it's an excellent time to take out a home equity loan (but not necessarily a home equity line of credit, which works differently, and only if you use it wisely).
Making the Decision to Refinance
If you decide to refinance, contact us and we can shop several lenders to help you find the best rate and terms for you specific situation. Rates are low and you should not hesitate to investigate whether you can save money by refinancing.
Jason Schweiger MTG Finance 253-315-5580 or visit my site