Accunet President Brian Wickert and Vice President David Wickert talk about refinancing a home, record-setting mortgage rates and more on this week’s episode.
This week’s highlights:
- Interest rates are at a record low. But what does it mean for you?
- Refinancing is a great idea, but make sure you’re doing it for the right reasons.
- Are you in forbearance? You might want to double-check.
Mortgage rate update: Week of July 19th, 2020
Last Friday, The Wall Street Journal touted record-low interest rates on its front page. This is referencing data from Freddie Mac, which reported mortgages falling below 3% for the first time in 50 years. Which is true…but it’s missing a few important points.
First and foremost, The WSJ failed to report on what it costs to achieve a low mortgage rate. Low rates aren’t free—in fact, they cost 0.7% of your loan balance. So, on a $250,000 loan, that’s an additional $1,750, not including things like appraisal, title and credit report.
Another thing to keep in mind is that these rates won’t necessarily translate to buyers. With rates being so low, every mortgage lender in America is overwhelmed with business (Accunet included). To try and stem the flow of new clients, a lot of lenders are raising their rates higher. So, even if the fundamentals of the market improve, there’s a good chance you won’t reap the benefits if you wait to buy a home.
Will rates keep going down?
We get this question a lot. The answer? No one knows. What we do know is that rates are low now.
David puts it like this: “It’s sunny outside today. It might be sunnier tomorrow, but that doesn’t mean you should wait for the weather to get better than it already is.”
Even if rates fall even lower, you can always refinance to take advantage of it!
Reasons to refinance your home
With rates as low as they are, now is a great time to refinance. But what are the primary motivations for refinancing?
- Divorce. If you’re getting a divorce, one spouse usually wants to keep the house. This necessitates a refinance.
- Cash-out refinances. Right now, average home value is up, meaning there’s probably more equity in your home than when you bought it. A cash-out refinance lets you access some of that equity, and use it for things like remodeling or paying off other debts.
- Pay less to live in the same house. This one is pretty straightforward. With a revised mortgage agreement, it’s possible to get a lower rate and a lower monthly payment. It’s a win-win!
- Shorten your mortgage length. This is a great idea if you’d like to pay off your loan faster. For example, moving from a 30-year loan to a 20-year loan. Not everyone realizes that 20-year loans exist, but they do, and they even have different rates!
Thinking about refinancing? Find out what you could pay with a different rate using our Monthly Payment Calculator!
How to get out of forbearance…when you didn’t opt-in to it
About a year ago, one of Brian’s good friends retired, and is now living off of investments, IRA income and other retirement funds. He called Brian to talk about lengthening his mortgage by a few years (which would result in a lowered monthly payment—the name of the game for a lot of retirees), when Brian noticed a few weird things on their credit report.
Namely, the client’s existing mortgage was in forbearance. When Brian mentioned this, the client was shocked! They hadn’t opted-in to forbearance. Actually, they had requested information on it, but never submitted the forms. But the powers that be still listed him as being in forbearance.
At first, we were skeptical. Then, we saw this same scenario play out with a different client.
If you’ve been put in forbearance, there are two ways to get out of it:
- If you haven’t been making your payments, you need to complete your current forbearance. Then, you need to make regular mortgage payments for at least 3 months.
- If you have been making your payments, you just need to cancel your forbearance. You also need to prove you’ve been making payments, which you can do using bank statements.
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