Here’s why refinancing your home at today’s rates isn’t a bad deal


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When mortgage rates plunged to record lows in the second half of 2020, many homeowners rushed to swap their existing loans for new ones. But in recent months, the mortgage refinance demand has dropped considerably. And for the week ending July 23, mortgage refinance volume was 83% lower than the same time in 2021.

Given the way mortgage rates have risen recently, this is not shocking. But while refinancing may not have the same appeal these days as it did in the summer of 2020, or even the summer of 2021, some homeowners could still benefit from going this route.

You could still save money

At the time of this writing, the average duration of 30 years refinance rate is just over 5.6%. When we compare today’s rates to rates that were available a year ago, the thought of getting a new mortgage may seem unappealing.

But let’s put today’s refinance rates into perspective. There was a time when the average refinance rate over 30 years was 7%, 8% or more. In fact, today’s mortgage rates are far from the highest borrowers have ever experienced. And it’s important to keep that in perspective when deciding if a refinance is worth it.

Also, your credit may be low when you signed your mortgage, so the rate you pay is higher than today’s refinance rates. If so, getting a new home loan might make sense.

Finally, if you have signed a adjustable rate mortgage whose interest rate is rising, you may want to refinance it with a fixed rate loan. This could help you avoid a scenario where your home becomes increasingly difficult to afford.

You may want to leverage your capital

Right now, homeowners across the United States are sitting on record highs of equity due to soaring house prices. If you need money, it’s worth looking into a cash refinance. This type of refinancing allows you to borrow more than your existing mortgage balance, so you get a cash payment that you can use for any purpose.

Although you will pay more to refinance a mortgage now than you would have last year, you could pay well over 5.6% if you take out a Personal loan to raise the money you need. And chances are you’ll pay more for a home equity loan or HELOC, too. So while today’s refinance rates aren’t the most competitive, compared to other borrowing options, they are quite affordable.

You might assume that now is not the time to refinance because rates are rising. But in reality, today’s refinance rates aren’t the bad deal you might think they are. Now, if you have a 30 year fixed rate loan at 4% interest and you don’t need to take money out of your home, then refinancing is a decision you might want to skip. . But if you’re paying a high interest rate on your mortgage, your loan isn’t fixed, and you need cash, refinancing might be a very smart move right now.

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