Will mortgage rates continue to drop in 2020? Should you refinance your mortgage now or wait and see what happens with the real estate market next?
The coronavirus is wreaking havoc on the global economy, but there is one bright spot here in America.
Thirty-year mortgage rates in the U.S. dipped to 3.29 percent earlier this month, the lowest level ever recorded. In response to the drop, applications to refinance mortgages soared more than 220 percent.
Interest rates rebounded slightly in the next week as lenders adjusted to the influx of home loan refinancing applications. The Federal Reserve has now cut interest rates to between 0 and 0.25 percent, but that doesn’t mean we’re going to see 0 percent mortgages anytime soon, but it could push mortgage rates even lower.
Will Mortgage Rates Continue to Drop in 2020?
Mortgage experts at Realtor.com expect rates for 30-year loans to drop down again, not to the level where the Federal Reserve’s new federal funds rate of between 0 percent and 0.25, but to the mid-to-low 3 percent range in coming weeks.
“Today’s low mortgage rates are equivalent, in some cases, to $30,000 off the price of a home in some of the nation’s most expensive markets,” says Ali Wolf, chief economist at Meyers Research, a national real estate consultancy. “Mortgage rates are turning back time on affordability.”
“Mortgage rates will go lower. [And] that’s good news for buyers,” says Realtor.com’s chief economist, Danielle Hale. “It’s probably enough, based on what we know now, to keep buyers in the market. It’s also going to help people refinance and have more cash in their pockets.”
Not everyone agrees. According to Lawrence Yun, Chief Economist of the National Association of Realtors, their research indicates that the Coronavirus could cause a 10 percent drop in home sales, although that could also push interest rates lower because of reduced demand.
Should you take advantage of better mortgage rates and refinance now, or wait and see what happens?
Should I Refinance My Mortgage Now?
“You should refinance your mortgage only if it makes sense financially,” noted Ilyce Glink, publisher of ThinkGlink.com and CEO of award-winning financial wellness technology company Best Money Moves. “For some people, lowering the monthly payment even if it means extending the loan term will make sense. But ideally, if you can reduce your monthly payment, lower the interest rate, shorten your term and keep refinancing costs in check, refinancing your mortgage is a no-brainer.”
When you’re considering refinancing your mortgage loan, Glink recommends you ask yourself this:
- Can you lower your interest rate?
- Can you lower your monthly payment?
- Can you shorten your loan term?
- Can you pay off the refinance in two years or less?
If you can say yes to all of the above questions, or even just a few, there’s a good chance it’ll save you a fair amount of money in the long-run.
How to Refinance Your Mortgage
First, pull a copy of your credit report and score. You can get it for free at My.Equifax.com or you can go to AnnualCreditReport.com and get a report for free and pay less than $10 for your credit score. (Your free VantageScore from My.Equifax.com will be a good indication of where you are, however.)
Glink suggests speaking with at least four different mortgage lenders and ask them the following questions:
- What interest rate can you get based on where your credit score and debt-to-income ratio are today?
- How much will refinancing cost?
- How quickly will you pay off the cost of your refinance?
- What will my new monthly payment be?
- Can I get rid of private mortgage insurance (PMI) with this refinance? (If you have PMI, and can get rid of it with a refinance, you’ll save even more cash, Glink says.)
At that point, you’ll know how much the refinance will cost, how much you’ll save and how you should move forward.