Is it too late to reduce your mortgage payments by refinancing? | Money

STATEPOINT MEDIA – Experts say that with mortgage rates starting to rise, refinancing your home now could be your last best chance to lower your monthly mortgage payment as rates stay near all-time lows.

Those who refinanced in early 2021 have already reaped the benefits. According to a recent research report by Freddie Mac, borrowers who refinanced their 30-year fixed-rate mortgage into another 30-year fixed-rate mortgage in the first half of 2021 saved over $ 2,800 in payments. mortgage on principal and interest.

But mortgage rates are rising. Indeed, in October 2021, the 30-year fixed-rate mortgage, which is the most popular type of mortgage, reached its highest level since April, topping 3.0%. Freddie Mac predicts that mortgage rates will continue to rise, averaging 3.5% for the 30-year period set for 2022. This is up from an average of 3.0% in 2021.

So, is it time to refinance your home loan? To help you make an informed decision, Freddie Mac offers answers to frequently asked questions about the refinancing process:

• What does refinancing mean? When you refinance your mortgage, you are applying for a new mortgage to replace your current mortgage, which will result in a new rate, a new term, and a new monthly payment. The most common type of refinance is no-withdrawal refinance, in which you refinance the remaining balance of your mortgage.

• When should I consider refinancing? Generally, refinances make more financial sense when average interest rates are at least half a percentage point lower than the interest rate on your current mortgage. Another reason to consider refinancing is that your financial situation has improved, allowing you to get a shorter term loan and own your home sooner. Finally, if you currently have an adjustable rate mortgage (ARM) and it is adjusting upwards, you may want to convert it to a fixed rate mortgage that gives you the security of consistent payments.

• Is refinancing free? While refinancing your mortgage can save you money in the short and long term, it’s not free. For the most part, the fees for refinancing are similar to those you paid when you bought your home, including loan origination fees. Required services are involved, such as assessments and state and local fees which can vary widely depending on where you live. The average cost of a refinance is almost $ 5,000, so you need to think carefully about how long you plan to stay in your home to make sure the savings outweigh the costs.

• Who should manage my refinancing? You don’t need to use your current lender to refinance your loan. In fact, it is in your best interest to shop around and compare loan estimates from several lenders for the best deal and cost. It may take longer, but even a difference as small as a quarter of a percentage point can save you thousands of dollars over the life of your mortgage. The good news? Prices are often negotiable. In other words, you can ask the lenders to match the rate offered by another lender.

There might not be a time like today to lock in the lowest possible rate and receive the highest monthly savings. To get an idea of ​​what refinancing could save you, go to Freddie Mac’s refinance calculator, as well as additional resources for buying and refinancing a home, at monhome.freddiemac.com.

As with any large financial enterprise, you’ll want to do your homework, carefully consider your short and long-term goals, and work closely with your lender to perform a cost-benefit analysis.

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