Mortgage rates drop below 3% and open a wider window for refinancing savings

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Mortgage rates drop below 3% and open a wider window for refinancing savings

Low. Above. Low. Above. Aa and down again.

US mortgage rates have been rising week by week, but here’s the important part: Despite all the fluctuations, the US standard mortgage average has avoided jumping above 3% for almost two months.

A popular survey shows that interest rates have only fallen slightly below the 2 mark, which not only helps home buyers, but also homeowners who can and can refinance Save hundreds on their monthly payments.

30 year mortgage

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The average interest rate on a 30-year fixed-rate mortgage – America’s most popular home loan – fell to 2.96% last week, from 2.99% a week earlier, mortgage giant Freddie Mac said reported on Thursday.

Interest rates are up from 2.65% January all-time low, but they are still among the lowest in history. A year ago, the 30-year festival averaged 3.21%.

Mortgage rates are likely to stay cheap for a while, says Realtor.com chief economist Danielle Hale. She says that while mortgage rates tend to rise and fall with the economy – and many indicators show a strengthening labor market – employment is still a long way from its pre-pandemic peak.

“As long as this is the case, mortgage rates are likely to hover around 3%,” says Hale.

15 year mortgages

According to Freddie Mac’s long-standing survey, the average rate on a 15-year fixed-rate mortgage fell to 2.23% last week. That is a decrease from 2.27% in the previous week and 2.62% in the previous year.

These shorter term loans are popular with homeowners refinancing who can afford higher monthly payments and want to lower their lifelong interest costs.

With inflation accelerating as the economy recovers, borrowing money for a home is a wise bet today, says Michael Greiner, Assistant Professor of Management at Oakland University in suburban Detroit.

“Very few people pay cash for their home. The real cost of a home is therefore the amount paid plus interest. If the interest rate is lower, you are essentially buying your home at a lower price, ”Greiner told MoneyWise.

5/1 adjustable rate mortgages

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The typical rate on a 5/1 variable rate mortgage fell to 2.55% last week, down from 2.64% the week before and 3.1% a year ago at that time.

ARMs typically start out with lower rates than their fixed rate cousins, but after a period of time the rates can “adjust” in lockstep with up or down. the key rate or another yardstick.

These loans are called 5/1 ARMs because they are fixed for the first five years and then adjusted every (one) year.

14M could benefit from refinancing

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With an average 30-year mortgage rate below 3%, millions of homeowners have the potential to save thousands of dollars and increase their monthly cash flow through refinancing, according to a recent report.

An estimated 14.1 US mortgage holders now have the option Save an average of $ 287 per month through refinancing, according to mortgage technology and data provider Black Knight. Around 1.7 million could save over $ 500 monthly through a refi.

You are considered a good candidate for refinancing if you have at least 20% equity in your home and could lower your existing interest rate by at least three quarters of a percentage point (0.75) with a new 30-year mortgage, says Schwarzer Ritter.

Having a credit score of 720 or better also helps. If you haven’t checked yours in a while, it’s easy Check your credit score for free.

How to Find the Lowest Mortgage Rate

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Low mortgage rates also benefit home buyers struggling with skyrocketing home prices.

“There’s still time to take advantage of low interest rates,” says Hale. “However, the number of buyers applying for mortgages has declined in recent weeks due to the few, fast-selling offers and the record high asking prices.”

If you’re determined to find the lowest mortgage rate, studies by Freddie Mac and others have shown that Compare at least five mortgage offers from different lenders can result in significant savings.

So while you let your shopping muscles play, you can also buy after the best tariff for homeowners insurance. You could easily overpay.

And note that when applying for a mortgage, lenders want to see a solid track record of on-time payments for all of their debts. If you have several high interest loans, consider adding them to one single low interest debt consolidation loan to settle your credit faster and cheaper.

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