The recent jobs report came in and it was largely disappointing, providing fuel to the speculation that interest rates will be cut soon by the Fed. This would be a significant departure from interest rate policy of 2018, where rates were increasing with the expectation of more hikes in 2019. Despite strong economic growth in the first quarter, tariffs have been heating up in a trade despite with China and most recently against Mexico as a policy tool around illegal immigration. All of these items put together create headwinds for our economy, and interest rates have been dropping significantly.
The ten-year Treasury yield has fallen to its lowest level since September 2017. Mortgages rates closely follow this benchmark and we have seen interest rates on 30-year fixed mortgages fall below 4%, with current rates closer to 3.75% (and 15-year mortgages at 3.25%). For those people that have purchased a home in the last 18 months, it is a good time to check your rates on your mortgage.
What do we look for in determining whether or not it is a good time to refinance?
The current rate versus your mortgage rate (we want to save at least 0.50% in most cases)
Do you have private mortgage insurance and can refinancing eliminate it?
Projected closing costs on the loan
Expected time to stay in the home
Monthly payment tolerance (how much can you afford to pay and for how long?)
Whether or not a lump sum can be made into the mortgage or if money is needed for home improvement projects
For our clients, we look at these factors and help them determine whether it is right to consider a refinance. We involve a mortgage loan officer to shop the rates and get through the underwriting process, which involves a fair amount of paperwork. You never know when Fed policy and rates can change, so now is a good time to check your rate and see if it may benefit you to consider refinancing.