Due to Covid-19 and the economic upheaval the country has experienced over the past year, it’s understandable that you may be hesitant to take out a mortgage and buy a house.
Mortgage rates, however, are currently at historic lows. If you’ve been thinking about buying a home, now could be the best time to do so.
And if you already have a mortgage, you may want to consider mortgage refinancing to take advantage of the low rates.Mortgage Refinance
Why Mortgage Rates Are Low
When the pandemic hit in March 2020, countries around the world shut down public-facing businesses to keep citizens safe. This caused widespread unemployment and a stock market crash, and we’re still dealing with the repercussions of this economic crisis today.
So why are mortgage rates at such an all-time low?
Mortgage rates are directly affected by the economy at large. Once the economy started to plummet, the Federal Reserve lowered these rates to compensate and keep the broader housing market stable.
After this initial drop in March 2020, they continued to lower rates even further. By the end of December, the average rate for a 15-year fixed mortgage was 2.38%, and the average rate for a 30-year fixed mortgage was 2.89%.
By February 2021, the economy started improving and mortgage rates began to go back up. Despite this rise in rates due to a stabilizing economy, the average rate for a mortgage is still much lower now than anything we saw before the pandemic.
We can expect rates to remain relatively low for the next few years. In fact, it’s unlikely that we’ll see rates this low again after the economy fully recovers.
Should You Refinance your Mortgage?
Now is an excellent time for mortgage refinancing. Since rates are at historic lows, you may be able to secure a new interest rate that’s much lower than your old one.
A lower mortgage rate can save you a significant amount of money in interest payments over the next several years.
Refinancing also gives you the option to convert your mortgage type. You can go from fixed-rate to an adjustable-rate mortgage or the other way around. Switching to an ARM could be a good option right now, as rates are so low, but you may also be subject to rate increases in the future.
Alternatively, switching from an ARM to a fixed-rate mortgage could help you secure a lower monthly payment.
Before refinancing your mortgage, it’s important to check and ensure you actually qualify for a lower interest rate first.
If you’ve paid off a significant amount of debt since you initially took out your mortgage, or your credit score has gone up since then, there’s a good chance you’ll qualify for a better interest rate.
But if you’ve taken on more debt or lost a job, refinancing might not be the best option for you.
See What You Qualify For
Not sure what you qualify for or where to start in your search? Credible is a free marketplace platform where borrowers can get quotes from several lenders in their network for mortgage refinancing by submitting one short form. Mortgage types include jumbo, conventional, and refinancing.
You’ll need a minimum credit score of 620 to qualify for their refinancing options.
If your credit score isn’t in the best shape and you’re having a hard time finding lower rates, some lenders in their network allow applicants to cosign with someone who better qualifies.
Should You Buy a House Right Now?
If you have the means to buy a house right now, you’ll enjoy some of the lowest mortgage rates we’ve seen in decades. You’ll likely pay less in the long run and you could also end up with a lower monthly payment.
With that said, it’s important to note that property values have been on the rise this year. This is because demand went up when the Federal Reserve increased mortgage rates. There are more people who want to buy homes than there are homes available for sale right now.
COVID-19 restrictions led to a large number of people working remotely. As a result, many have decided to move away from their jobs and closer to their families. Many people have also opted to move to more affordable suburban or rural a