Average mortgage rates, since May 21st, have fallen from 4.21% to 3.94%, a drastic drop for such a short period. Due to recent volatility in markets impacted by recent tariff threats and decisions, traders are investing in safer bond markets. Mortgage markets generally follow bonds, so the uptick is, in this sense, unsurprising. The question is: could you benefit from refinancing your mortgage?
Who Benefits?
If your mortgage rate is above the current rate, refinancing will bring down the cost of your mortgage. Refinancing allows you to access the new lower rate without taking out a brand new mortgage. According to recent measures, 5.9 million mortgage customers would benefit from refinancing. According to CNBC, if the rate dropped “just another quarter point, close to 7 million borrowers could benefit from a refinance, with a collective savings of just over $1.8 billion.” The current rate averages out to an average savings of $271 per month per customer.
Possible Drawbacks
While refinancing can be very beneficial, there are other factors to consider. In refinancing there are closing costs, just like when the mortgage was originally begun. Furthermore, the loan term could change. Your new pay-off date will likely be 10 years later than your original date. If these two considerations take effect, there may be an equity reduction as well. If you don’t pay out of pocket for the costs and/or the loan term is extended, you will lose some amount of equity in your home reflecting the charges, and changes.
Final Takeaways
The opportunity to refinance at a lower rate is tempting. Doing so can put more money in your pocket. You should consider, however, whether or not the benefits outweigh the costs. When you partner with Perry Homes to buy your new home, we have financing partners who will help you secure the best options for your situation, including options for subsequent refinancing. Whatever your plans are, feel free to contact us with questions about how we can help you in the process of finding a new home. Come see why Utah keeps coming home to Perry Homes.
