Is mortgage refinancing right for you?

Low mortgage rates have helped fuel it competitive housing marketbut for some homeowners they offer the opportunity to save money mortgage refinancing. For those who are pending refinancing, there are several factors to consider.

“If homeowners are in a situation where they have good credit and are currently paying a rate that is 3.5% or more, I highly recommend that you study this refinancing because there are rates that are well below 3% said the CFO of Bankrate.com. analyst Greg McBride told CBSN on Thursday. He said his consumer financial company has seen homeowners set 30-year fixed rates at around 2.75% in recent days. “So, you know, there are substantial savings. It’s a way to cut those payments: $ 200, $ 300 a month.”

Mortgage rates have risen this year from historic lows during the peak of the coronavirus pandemic in 2020. But interest rates remain low, with the national average 30-year fixed-rate mortgage rate at 3.28% and average refinancing rate at 30 years at 3.29. % from Thursday, according to Bankrate.

Search for “best deal”

As a general rule, if interest rates are below your original loan and you can reduce it by at least half a percentage point, it is worth considering refinancing. Some homeowners may also want to refinance to switch to a short-term loan, from a 30-year to 15-year mortgage, where they can pay off the balance more quickly with less total interest.

But keep in mind the added costs associated with refinancing, including origination and appraisal fees, as well as title insurance or taxes. McBride recommends getting quotes from three different lenders and looking for “the best deal overall,” which includes accounting for commissions, not just the best rate.

Another way that consumers could lower their interest rates, whether they are buying a home or refinancing, is mortgage points or “discount points”.

“It’s just a way to lower interest rates. And a point is equal to 1% of the loan amount, so if you borrow $ 300,000, a point will cost you $ 3,000,” McBride explained. . “This is effectively prepaid interest. This point can cause your interest rate to drop a quarter of a percentage point. Over time, that savings really increases.”

Time is of the essence, he added.

“The point of equality of points, usually about six years. So for people who don’t have cash, I’m not a big fan of it, especially with rates as low as they are,” McBride said.