February 7, 2020
Is your mortgage payment too high? Need to refinance to bring down the monthly cost?
Recent headlines about mortgage loan interest rates have contained the word “refinance” a lot lately; world events including the Wuhan virus, impeachment proceedings, and other news have conspired to help push mortgage rates lower.
Those things themselves do not directly influence mortgage loan interest rates, but investor behavior DOES. And because of that investor behavior, we have seen FHA loan interest rates move significantly lower. Some writers refer to that move in terms of historical context.
“Mortgage Rates At Three Year Lows!” screamed some headlines in early 2020. One consequence of those low rates? A surge in refinance loan applications as consumers rush to take advantage of the lower interest rates to save money on their mortgages long-term.
Rates began to creep higher this week as the coronavirus situation seemed to be “not as bad” as it was previously thought, and if that continues we may see another upward move in mortgage rates.
Some might view that move as a correction, but whatever you call it, the upward pressure on home loan rates will return as Wuhan virus fears and other issues begin to lose steam in the press.
What does this mean for you, the homeowner? If you need a cash-out refinance loan, now is a very good time to apply while rates are low. Those who need a simple refi loan to get into a lower interest rate may find it easier to qualify for than for cash out in cases where credit scores may be a concern.
FHA Streamline Refinance loans are an excellent choice for those with existing FHA loans who do not need cash out but want that lower interest rate or monthly payment.
In fact, those who apply for Streamline refi loans while rates a very low may have the best shot of all in terms of getting a more affordable mortgage.
Streamline loans require some benefit to the borrower in the form of either a lower payment, lower interest, a fixed-rate loan instead of an adjustable-rate mortgage, etc.
If you are thinking about a refinance loan but haven’t prepared to get one yet (checking credit, making sure you pay on time every time, etc.) today’s lower rates may not help.
But keep in mind that mortgage rates are cyclical and while the numbers may or may not move higher between now and the time you are ready to apply, the numbers won’t mean much to you until you do fill out the paperwork.
And don’t forget that by saving up a larger-than-needed down payment you can also negotiate for a lower interest rate with your lender; ask how low the rate would go if you paid more than the minimum 3.5% down and how much more you would have to pay to reduce the rate. And under what circumstances; your down payment might need to increase or you may need to purchase discount points. Ask your loan officer.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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