Tis the season for the number one reason for homeowners to refinance their homes in the COVID-19 pandemic economy. And why not be like NIKE and just do it, because interest rates are at 3.13% and continuously going down nowadays. A lot of home shoppers are definitely taking advantage of today lower interest rates, but according to the Mortgage Bankers Associations refinance index is 76% higher than a year ago. And across the real estate community, there are expectations that the refinancing of homes will go up to 1.35 billion in 2020 which will be at it’s highest since 2012. Now the refinancing environment is truly taking place because the Federal Reserve has committed themselves to keep interest rates low (near 0%) and continue purchasing mortgage-backed securities to help the economy scale back the sharp Covid-19 downturn. I love that this is happening, and I myself are looking at taking advantage of this as well. According to the article that I read regarding this matter, the first questions comes up, which is a decent/reasonable question which is. Why are you refinancing? How does it apply to your specific situation? Because at the end of the day, everyone real estate, and economic situations differ from everyone else’s. When we generalize it all homeowners should consider refinancing their mortgages when one wants to lower their monthly mortgage payments. And in 2020 COVID-19 economy having lower to no bills is definitely in everyone best interest. Now, why is that? There have been a lot of economic predictions that a lot of businesses will be going out of business by the end of 2020, and it’s in everyone, and I mean everyone's best interest to become as cash-heavy, and asset-heavy as possible. Another great reason is to shorten the life of their loan which is another way to increase one’s bank account savings in today world. Now I know that money, for the most part, loses value just sitting in a savings account, but having a significant amount saved and less unnecessary credit card debts etc allows one to have more borrowing power from traditional lenders. And refinancing allows one to pull cash or equity from their property or in a real estate investor circumstances properties which can open the doors of opportunities to purchase more real estate, stocks, bonds, and put money away for a rainy day.
Like I said everyone's motivation is different, and they’re not always motivated by interest rates, but by lower mortgage payments, especially if the lower mortgage payments are for rental properties, because then that means more cash flows. The article gives a great example, such as if slashing the interest rate from 3.8% to 3.5% on a $400,000, 30-year fixed-rate mortgage, initiated 5 years ago, could result in $250 saved every month, if the refinanced loan also lasts three decades. Yet, keeping the term the same, effectively restarting the clock, would mean more paid in interest overall. However the flip side of that is going to be someone who is comfortable with their payment and who wants to accelerate paying off their loan, in which case they can shorten their term,”. It just all depends on which direction you want to go in life with your mortgage, or mortgages. So always remember to chose, wisely and of course consult a financial professional before making any financial decisions.
If you're a motivated seller, or motivated real estate investor, please contact Larry Patterson of Patterson L. Properties LLC. at PttrsLr1@gmail.com
