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For the third week in a row, rates remain below 3%.
Even though experts predict long-term increases for rates over time, low mortgage rates won’t disappear overnight. “If you’re looking at a few weeks horizon or a month from now, I believe rates are within 0.1% of where they are right now,” says Gordon Miller, president of Cary, North Carolina-based Miller Lending Group, LLC.
With rates leveling off, borrowers have time to save by locking in a cheap interest rate for the long term. But for prospective homeowners, there are bigger challenges outside of the cost of borrowing money. With few homes for sale, home prices have skyrocketed. “Our housing market looks like the 1980s game Hungry Hungry Hippo with only one ball,” says Logan Mohtashami, housing data analyst at HousingWire. “It’s frustrating because people just want to buy a home to live in and [low] inventory is creating these accelerated home prices.”
Adding to the problem is that with refinance rates still at historically low levels, current homeowners are securing low rates and could wait out the frenzy. “Now you’ve got a low inventory because so many of these people that were considering selling, probably have rates at 2%,” Miller says. With rates above their all-time lows and rising home prices, selling your house “wouldn’t logically make any sense at that stage, because you’d be buying a smaller house with a larger house payment.”
So most of the savings from low interest rates may be seen by homeowners who can refinance. But you shouldn’t rush to refinance just because you can pick up a lower interest rate.
What to Know Before You Jump at a Low Refinance Rate
Over the last year, some homeowners were unable to afford the cost of refinancing their mortgage because of a job loss. But as the economy reopens and unemployment continues to improve, “now they’re getting jobs again and they’ll be able to qualify [for a refinance],” Miller says. And it still can be a great time to refinance as rates are low, even if they are higher than the record lows we had last year.
Refinancing can help reduce your monthly mortgage payment or shave years off of your loan term. But there are a lot of factors to consider before signing the dotted line to lock in what looks like an exceptionally low interest rate. “Everyone has to look at their own financial profile and see if it makes sense to refinance, some people’s loans are already fine rate wise,” Mohtashami says.
And you shouldn’t decide to refinance based only on the potential to reduce your interest rate by 1% or more, there are also fees to pay attention to. A lender may advertise what looks like an abnormally low rate, but charge you thousands of dollars more in fees.
Sometimes these fees are easy to miss because they can be rolled into the loan. Instead of paying out of pocket, you are giving up the equity in your home. Lenders may quote a rate that includes discount points “ … just to sound like they have the best rate in the world. And people get nailed on that and don’t even know what happened ,” Miller says. So you need to carefully review and compare the closing costs outlined in your Loan Estimate to be able to accurately compare refinance offers.