Hey! Guess What? Mortgage Refinancing is Making a Spectacular Return…Sort Of!
You know those good ol’ mortgage rates? They’ve nosedived this month. That’s right, and guess who’s cheering? Yep, homeowners. Savvy folks are hoping to catch this falling star, snag a lower rate, and watch their monthly mortgage payments tumble like dominoes. Recent data from the snazzy folks at the Mortgage Bankers Association reveals that mortgage refinance applications have rocketed a whopping 118% compared to last year—and the party’s not over. Matter of fact, the data from August 9 shows a staggering 35% rise…week on week.”
A Dive into the Surging Wave of Refinance Activity
So, what’s the score? Refinancing is on the rise thanks to the nosediving mortgage rates that started to take a dip in early August. And it’s not an unrelated coincidence, okay? The Federal Reserve is brewing a plan—looking to cut benchmark interest rates. Now, Laurie Goodman, a big-shot housing finance policy fellow from the Urban Institute, claims that mortgage rates usually dance to the Fed’s tunes. So, any whispers about a rate cut will directly influence today’s mortgage rates, now circling around 6.5% for a 30-year fixed-rate loan. Pull out your calculators, folks.
So, the moment that mortgage rates started falling, a chunk of homeowners pounced. But be clear, according to Goodman, this group is mostly made up of folks who bought homes last year—when the rates were sky-high. Mortgage rates hitting a staggering 8%? Seems like a nightmare now, right? Hence, Goodman says, “Who won’t find a 6.5% rate alluring compared to that?”
Get the Upper Hand: Lock in a Lower Rate
Meet Rocket Mortgage (NMLS: 3030). These are the folks who can open up the entire game of mortgage refinancing options for you. All you got to do is choose your state. Go ahead, pick one:
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Is it Wise to Refinance Now?
Goodman raises her hand, grabbing our attention. Sure, the refinancing percentage seems like Katy Perry’s Firework, but it’s more of a sparkler. According to her, “Yup, applications are up a jaw-dropping 118%, but they’re clawing up from a pretty measly level.” We’re still in basement-level folks.
Goodman presents a sobering statistic from the Urban Institute which shows that in July, over 88% of folks with mortgages had locked rates under 6%. Sad, but true. Well, actually that’s quite good for them, isn’t it?
Moreover, remember those lucky ones who refinanced or bought homes when the mortgage rates were chilling at historic lows? That was during the pandemic time, you know. With Freddie Mac data offering a glimpse, we learn that in 2021, the rates went below 3% for quite a few months on end. Holy Guacamole! Laurie Goodman puts it succinctly as a “once in a lifetime opportunity.” If I were them, I’d sit cozy and not mull on refinancing anytime soon—or probably ever.
Let’s get realistic, the majority of homeowners are sitting comfortable with mortgage rates between 3% and 5%. With today’s rates happily waving from a higher vantage point, even the small crowd with rates around 6% needs to ponder if refinancing is worthy.
Goodman throws a rule of thumb: it’s smart to refinance if the new rate is at least 0.75 percentage points below your existing mortgage rate. So, if you’re at 6.5%, and the rates dare to plunge to 5.75% or lower, it’s game time!
But caution, caution! Don’t forget the costs that come with refinancing. You’ve to factor in expenditure for application, origination, and title fees—a déjà vu of your first mortgage. No free lunch, right? Goodman implies that while these costs might not be as high as the initial purchase price, they would still hammer your wallet. The golden advice? “Ensure your lower mortgage payment saves enough to cover these closing expenses.”
Wrap Up That Better Rate Now
Get set to ride the waves of the refinancing process with Rocket Mortgage (NMLS: 3030). They’re ready and waiting to steer your ship towards lower mortgage payments.
Here’s some more food for thought:
- Ready to mingle? Check out the 8 Best Mortgage Lenders of 2024
- Like horror stories? Here’s one for you – ‘Zombie’ Mortgages are Back with a Vengeance to Haunt Homeowners
- Feeling anxious? Let’s breathe. Here are 5 Tips to Help Homebuyers Cope with High Mortgage Rates