Maybe it’s time to refinance again? A survey released by Freddie Mac late last week shows that 30-year, fixed-rate mortgages averaged 3.97 percent, down from 4.12 percent.
That’s the first rate dip below 4 percent in 16 months. Rates were pushed down by the chaos that erupted on the stock market Wednesday as investors reacted to the financial malaise weakening Europe and Asia, disappointing data on U.S. spending, and jitters about the Ebola outbreak.
“We never thought we’d see a 30-year, fixed-rate mortgage below 4 percent again,” said Frank Nothaft, Freddie’s chief economist. “That’s a window of opportunity for so many.”
Usually, borrowers refinance if they can save at least half a percentage point on their interest rate.
Ultimately, the decision should turn on a number of factors, including how much they owe on their mortgages and how long they plan to stay in their homes, Nothaft said.
Moving in six months?
Refinancing may not make sense, even if your rate drops an entire percentage point. The cost may exceed the savings.
Also, even all these years after the housing bust, your home value still may be so low that you may not have more than 20 percent equity in your property — in which case you’d have to pay private mortgage insurance on a new loan.
As for the size of the loan, consider the difference a half-percentage-point rate drop can make on a large balance versus a small one. A homeowner would save $183 a month on a $625,500 loan if the rate is cut from 4.47 percent to 3.97 percent. The monthly savings on a $100,000 balance: $29.
Consumer advocates generally say that if homeowners see a rate that works for them, they should grab it. Just like stocks, interest rates fluctuate all day long, and the potential savings can disappear in a flash.
