For consumers who purchased their homes or took out any kind of residential mortgage loan in 2022 the future prospect of refinancing can seem very attractive. Here are some things you might want to consider as to finding what mortgage rate is generally the best to justify moving forward on a refinance when rates drop…
There are a few schools of thought here as it relates to refinancing when interest rates drop. It all boils down to what is the net tangible benefit. Generally speaking, if you’re going to pay fees associated with refinancing the mortgage you need to be at least 0.75 generally to 1% lower in rate if the only benefit is lowering your monthly payment. However, if you’re going to be refinancing and maybe your interest rate is going down 0.5% but you’re also getting rid of PMI at $200 to $300 a month and paying fees, for example, that could be a justification.
That being said of course if your savings is greater than 3/4 to 1% that’s always a plus, but start small. As for the big picture if you took out a mortgage or got any kind of a mortgage loan in 2022 here’s an example of a refinance cycle that you might be able to expect in the coming years let’s say you got a 6.25% 30 your fixed in 2022. Let’s say rates go to 5.25 in a year. That’s an opportunity to refinance. Don’t throw away an opportunity to refinance for what may or may not come in the future. The old adage that a bird in the hand is worth more than 2 in the bush as it relates to refinancing is absolutely accurate.
Take what you can get today knowing you’re making a good decision for yourself and your family financially and use that as a framework for a subsequent opportunity that might present itself in the future. Don’t wait for something in the future when you have a golden opportunity to refinance today. Here’s why -say your rate is presently 6.25, when you can get 5.25 take it, don’t hold out for 4.5% thinking you can time the market. You might be waiting for rates to go to 4.5% to do something for years and during that time you’re waiting you’re still paying the 6.25% mortgage and the interest accompanying balance during the time.
Take the forthcoming market opportunities as an opportunity to save money, increase your wealth, and lower your fixed payments on your house. Remember your house is still going to continue to appreciate over the course of time, you’re still getting built write off all of your mortgage interest and all of your property taxes.
Another good rule of thumb in terms of simplicity is if you can refinance and save $200 a month or more it makes sense to refinance. If you’re not quite saving $200 a month however the loan is not costing you anything that could be an opportunity as well refinancing each time and doing no points no fees loans. If you’re interested to learn how to future refinance may benefit you, begin with a quick quote today.
