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Nine months ago, but it might as well have been a decade ago, I wrote about falling mortgage rates offering a great opportunity to refinance.
Since then, mortgage rates have fallen even more, in large part because of COVID and US Treasury rates declining to yet another all-time low.
For a short time post-COVID, mortgage rates actually rose, as lenders were overwhelmed and raised their rates to try to manage a flood of customers. But since April, mortgage rates have declined substantially, reaching the lowest levels on record.
If you are a homeowner with a large mortgage, now could be a great time to lock in very substantial savings by refinancing into a much lower rate 30-year or, if you can afford the higher monthly payment, an even lower-rate 15-year mortgage. As discussed in my prior post, reducing the interest rate on a $300,000 30-year mortgage by only 0.75% results in a reduction in total payments of over $46,000 over a 30 year period. In many cases, the rate reduction may be much lower because rates have fallen so much. For example, the average rate on a 30-year mortgage has fallen by more than 1.5% since peaking in late 2018.
The best way to determine if a refinance makes sense is to weigh the cost of the refinancing (generally some fixed fees) versus your expected savings on the interest payments over time. Here are some tips and questions to consider:
How long do you plan to stay in your home? The longer you plan to stay, the more likely it is to be worth it. But make sure to run the numbers - if the interest savings is substantial, it might still be worthwhile even if you only plan to stay in your home a fairly short while (a few years).
How much liquidity do you have? If you have substantial savings, it may be worth refinancing into a much lower rate 15-year mortgage, which will generally have rates about 0.5% lower than 30-year mortgages on average. Your monthly payment will likely be higher, but your interest cost will be significantly lower, allowing you to build more equity.
Make sure to shop around! It makes sense to talk to your current lender first, but make sure to compare their refinancing rates to other lenders in the area. I generally use Bankrate’s comparison tool (not an endorsement), and there are many other mortgage rate tools available online.
While a refinance might not be right for everyone, today’s unprecedented interest rate environment makes it worth considering more than ever. If you’ve refinanced lately (or are considering it), I’d love to hear about your experiences and any tips you have.
I hope this has been helpful. If you liked it, please share it with a friend! Also, please send me your feedback, requests, and success stories.
Finally, a bonus special feature for reading to the end:
Recommendation of the Week
My wife and I are thoroughly enjoying Below Deck Mediterranean, ostensibly another trashy Bravo reality series, but in reality a trashy but fascinating look at the working lives of the crew of The Wellington, a 184-foot charter yacht. The show is super enjoyable and actually has some (slightly) interesting things to say about the business of charter yachts, their clientele, and workplace dynamics when you are within a few feet of your coworkers at all times. Like most reality shows, I assume much of it is actually scripted, but the NYT article that turned me on to the show suggests that it is slightly more organic than average. Enjoy!
 Before taking refinancing fees or tax deductions into account.
 No ads or sponsored placements, just stuff I’m really enjoying.