By Rae Oakley, Flyhomes Mortgage
As you can see from this post’s title, mortgage rates have progressed steadily downwards since this time last year. While this may make your eyes glaze over, it is, in my opinion, one of the best gifts we can ever receive from the bond market (especially going into the holiday season): the gift of savings.
Let me show you what I mean. Since this time last year, rates on a conventional 30-yr fixed rate mortgages have dropped by over 1%. Back in early November 2018, the average par rate was hovering around 4.9%. Today, it’s less than 3.8%. That’s a huge drop.
Not convinced? Take the median home price in Seattle, which is around $715,000 at the time of writing (Nov 2019). To further illustrate my point, I have created a chart below that shows four different loan scenarios at this price point. Each scenario is a different down payment amount, and therefore a different loan amount.
If you bought or refinanced at this time last year, you may have taken an interest rate close to 4.9%. With today’s rates, you could be saving nearly $400 (or more!) on your monthly mortgage payments.
One more time for the people in the back: this chart shows that if you put 20% down on a $715k house last November, you could be saving $390 on your monthly mortgage payment by refinancing now. If you put 5% down last November, you could save over $460! per! month! That’s over $5,500 per year!
So as I was saying: this is a gift from the bond market. Now, our gift to you is 3 ways to take advantage of it
1-Consider a rate and term refinance
As the chart above shows, you could be saving hundreds of dollars each month by updating your mortgage’s interest rate. It only takes a quick call to your mortgage advisor to figure out whether this makes sense for you. Be sure to have your approximate credit score and your home’s approximate market value on hand when you make the call. For more information, here’s our Beginner’s Guide to Refinancing.
2-Queue up home improvements or consolidate your debt with a cash-out refinance
A cash-out refinance utilizes the equity you have in your home to free up cash for things like home improvements, debt consolidation, or honestly, whatever you want. This option can be more attractive than other debt forms like credit card debt due to the dramatically lower interest rate associated with the loan. So, if interest rates are low, a cash-out refinance might be the best way to help you accomplish your financial goals. Read our break down of cash-out refis here.
3-Upgrade to your new dream home
Lower interest rates mean greater purchase power. If you have been considering selling one home and buying another, you might be in a better position now that rates have dropped. Find out more with our Trade-Up program.
Want to learn if a refinance makes sense for you?