Keller Williams

The Feds Cut Rates to 0%, Should I Refinance my Home Mortgage?

The Federal Reserve’s latest rate cut on the benchmark federal funds to a range of 0% to 0.25%, has many people wondering what this means for home mortgage rates.

In March, the Fed announced a rate cut which resulted in mortgage rates hitting their lowest point in 50 years. However, with the newest cut, don’t expect to see mortgage rates drop to 0%. Instead, mortgage experts are predicting rates are likely to be around the mid- to low-3% range for a 30-year fixed loan.

It’s tempting to refinance your mortgage when rates are this low. However, a re-fi may not be saving you money in the long run. Knowing when to refinance is the key. Ask yourself these important questions before calling up your mortgage lender.

How long will I live in this home?

Homeowners need to keep the mortgage long enough for the monthly savings to exceed the thousands of dollars spent in closing costs. For example, if you saved $1,500 a year by refinancing and you paid $5,000 in closing costs, it will take four years before your savings out weight the cost.

Given the time it takes to pay back the closing costs, experts agree that if you are planning to move in the next five years, you may save more long-term by sticking with your existing mortgage.

What rate drop makes it worthwhile?

If you can shave off one-half to three-quarters of a percentage point or greater from your current mortgage interest rate, it’s worth making some calls to lenders.

As you did with your original mortgage, in order to score the best deal, be sure and comparison shop. Not only do lenders compete on interest rates, they also compete on closing cost. And don’t forget to talk to your current lender. Once they learn you’re shopping, they may be willing to match or beat any offer you get in order to keep your business.

It’s hard to know what to do in these uncertain times. It’s best to turn to the experts for advice. Give the Garatoni Group a call at 612-821-7456. We are happy to walk you through any questions or concerns. We are with you on every step!