Your money: Buying or refinancing? The mortgage rate frenzy is back
Send a link to a friend
[June 19, 2019] By
Beth Pinsker
NEW YORK (Reuters) - Mortgage rates are
nearing historic lows again in the United States, making it an ideal
time to buy a home - or refinance.
"It’s amazing how many times a once-in-a-lifetime opportunity comes
around," said Keith Gumbinger, vice president of hsh.com, a mortgage
information website.
This is the opposite of the steadily upward movement of rates that
experts forecast for 2019.
Average rates are around 3.82% nationally for 30-year-fixed mortgages,
after peaking near 5% in November. The dynamic could shift again on June
19, when the Federal Reserve announces its latest decision on short-term
interest rates.
Although mortgage rates are tied to the U.S. benchmark 10-year Treasury
note, they are sensitive to global economic trends.
WHEN TO REFINANCE
The people who need to pay the most attention are homeowners who are
eligible for refinancing. Some 6.8 million borrowers currently could
benefit from a refinance, according to analysis by Black Knight, a
mortgage data analytics company. Borrowers on average would save $268 a
month.
![](http://archives.lincolndailynews.com/2019/Jun/19/images/ads/current/LPL_small%201.gif)
A significant share are new homeowners, who bought in the last 12
months, when rates were 4.5% or higher.
"It’s fairly unprecedented to have a homebuyer refinance within six
months," said Ralph McLaughlin, deputy chief economist for CoreLogic, a
real estate data company.
Banks usually frown upon it, but motivated homeowners can make it
happen. One such individual is Zachary Pardes, a 32-year-old advertising
director who bought a house last year with his wife in Fairfield,
Connecticut. While they tried to purchase a house with a 3.5% rate like
many of their friends and family, they missed out and ended up with
4.5%.
Now Pardes is keeping a close eye on rates. If they drop a full
percentage point - which is generally the rule of thumb for a refinance
to make sense - he will jump.
"That translates to thousands of dollars saved each year, and I already
live in one of the most taxed states in the country, so everything
helps," Pardes said.
[to top of second column] |
![](../images/061919pics/busine17.jpg)
Homes are seen under construction in the northwest area of Portland,
Oregon March 20, 2014. REUTERS/Steve Dipaola
![](http://archives.lincolndailynews.com/2019/Jun/19/images/ads/current/castlemanor_sda_FINANCIAL_2017.png)
ALREADY JUMPING
Many people already are taking the refinancing leap. At Nations Lending,
an independent mortgage broker based in Cleveland, refinancings started
to spike in April, with a 32% increase in applications over last year,
according to Chief Executive Jeremy Sopko. May's increase was 41%. The
biggest activity was in South Carolina, Texas, Tennessee, California and
Illinois.
The number of millennial buyers doing cash-out refinances also spiked,
Sopko said. In a cash-out refinancing, homeowners remove a portion of
equity from their home while adjusting their loan rate.
The key to deciding whether a cash-out refinance is worthwhile is to
consider the cost of the debt versus where the money will go.
Paying off high-interest debt or student loans, buying investment
properties or paying college tuition for a child might make sense, but
using the funds for a vacation or big television would not.
"It’s important that you make that money work for you," McLaughlin said.
Otherwise, a home equity line of credit or another type of loan might be
more appropriate for your needs.
A typical Nations Lending client who bought their first place two years
ago for $200,000 could save $169 a month with a 1% rate drop, from 5% to
4%, especially if they could ditch the extra payment of private mortgage
insurance in the process, Sopko said. If homeowners cash out an
additional $20,000 to pay off credit card debt, they could end up saving
$523.
"They're not getting raises like that on a monthly basis, so that's a
significant savings," Sopko said.
(Editing by Lauren Young)
[© 2019 Thomson Reuters. All rights
reserved.] Copyright 2019 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
![](http://archives.lincolndailynews.com/2019/Jun/19/images/ads/current/graue_19_cruze_050619.png) |