We’ve all seen the headlines. Mortgage rates have recently declined! With this news, many homeowners are wondering-is now the time to refinance? Potential homebuyers are also contemplating whether or not its the right time to jump into the purchase market.
First, let’s talk about refinancing. If you got your mortgage within the past couple of years, it would probably make sense to look into it further to see if it would be worthwhile. The way to view the equation is to compare how much it costs you to refinance vs. your savings each month. In most cases, if you can make up the cost in 24 months or less, it’s definitely worth considering. For example, if the cost of refinancing is $3000 and you’d save $300 a month on your payment, then the refinance would pay for itself in 10 months. Sign me up!
Now it’s possible that rates could decline further, but there are no guarantees, as mortgage rates are notoriously difficult to predict. Even though the Federal Reserve is widely expected to reduce short term rates at their next meeting in September and perhaps cutting rates further in the coming months, lenders are already taking that into account when setting mortgage rates today. Also, if you refinance now and lock in your savings, you can always refinance again down the road if rates decline enough to make it worth doing. By doing it now, you at least guarantee a significant amount of savings in case rates decide to go back up.
The same logic can be applied to purchasing. Mortgage rates are lower right now than they have been in over a year. What else is happening though? Experts predict home prices will continue to increase. So if a homebuyer has been waiting on the sidelines, it’s probably time to get in the game.
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