Now may be the very best time in history to refinance your mortgage. The reason: rock-bottom, all-time record low interest rates. Since the middle of the Great Recession, the Federal Reserve has aggressively kept rates low in order to boost the economy and those low rates can mean big savings for homeowners. Here are three reasons why now is a great time to refinance a mortgage.
1. Low Interest Rates Mean Lower Monthly Payments
How much you pay each month to the mortgage company is greatly affected by the loan interest rate. Even lowering your rate by one percent by refinancing could reduce your payment by $100 or more each month. That extra money could fund lots of other purchases or investments.
2. Shorten Your Loan and Save Money
Because interest rates are so incredible low right now, refinancing into a shorter loan term is more affordable than ever. By converting your mortgage from a 30-year loan to a 15- or 20- year loan, you may have to make slightly higher payments each month, but the difference is not huge because rates on those shorter loans are even lower. Cutting your loan term can save you tens of thousands of dollars at least over the course of your mortgage.
3. Convert Your ARM Loan Before Interest Rates Rise
For those who got into adjustable rate mortgages (ARMs) during the housing boom, the currently low interest rates are actually really helpful in terms of monthly payment savings. Unfortunately for these borrowers, interest rates are likely to start rising within the year and even if the increase is gradual, rate are probably not going to remain around these historic lows forever. Now is the perfect time to refinance into a fixed rate mortgage (FRM) to lock in such attractive rates.
For those who can qualify, now is an excellent time to take advantage of the lowest rates on record with refinance loans in order to cash in on major mortgage savings.