3 ways to take advantage of low interest rates

Mortgage rates have found their way down to the lowest point of the year.

Last week, they hit 4.10 percent for a 30-year fixed-rate mortgage (FRM) and 3.23 percent for a 15-year. Last year at this time, they were 4.58 percent and 3.6 percent respectively, according to the Freddie Mac Primary Mortgage Market Survey.

It’s not quite the growth toward 5 percent that most of us predicted would happen in 2014. In fact, the downward trend is quite the opposite.

This is good and bad news. The bad news first: The lack of interest rate growth means that the economy is not growing as much as anyone hoped. This also means interest rates on savings accounts are continuing to stagnate, which squeezes the budgets of a lot of retired folks on fixed incomes.

But this is good news for homebuyers, who should be thankful for the continued low rates. It’s also good news for current homeowners, who could have the opportunity to refinance their mortgages. With interest rates remaining low, now might be the time to consider making some financial moves.

1. Refinance your mortgage

Refinancing isn’t all the rage anymore. Interest rates have gone up since they hit their lowest point at 3.31 percent for a 30-year FRM in late 2012. That’s when many people were refinancing. If you didn’t jump on the trend then, do it now: Interest rates aren’t even a full point higher than their lowest rate. Let’s not forget that 7 to 9 percent was the norm in the ‘90s and early 2000s.

So if you’re currently paying 5 percent or more, it’s not too late to slash your mortgage payments. Read about my four rules for a home run refinance here before you get started.

2. Take out a home equity loan

If you’re like me, you probably have a list of home improvements you’d like to do. If you’re putting them off because you don’t have the cash, now may be the time to secure some in order to make vital improvements or boost your home’s value with a remodeling project. Interest rates for home equity loans and home equity lines of credit (HELOC) are in the low 4s as well.

A word of caution: Only take out a home equity loan if you have a good chunk of equity. You don’t want to wipe out what you have. Also, if you’re going to use the loan to make home improvements, make sure they add value to your home. Check out this article to see which remodeling projects add the most value.

3. Invest in real estate

Most early real estate investors don’t just buy whole homes in cash (though that’s always ideal, isn’t it?). Instead, they get financing. While the rules are a little different when you’re buying an investment property rather than a home to live in—the down payment needs to be bigger, for starters—the rates are going to be comparable.

For more information on getting started, see my series, Intentional Investor: How to Be Wildly Successful in Real Estate.

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About Ilyce Glink

Author of 13 books, including the bestselling 100 Questions Every First-Time Home Buyer Should Ask. Writer of the nationally syndicated column, “Real Estate Matters.” Top-rated radio host in Atlanta. Writer for CBS MoneyWatch.com. Managing editor of the Equifax Personal Finance Blog.
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