Why you should refinance your mortgage


CoreLogic released its March Housing Market Update report, which features the graph below showing the steep decline in mortgage rates over the past year for various types and terms of homeowner and owner-occupied loans. investors.

Specifically, average mortgage rates for new loans declined by 70 basis points for homeowners and 70 basis points for investors through January 2021:

Mortgage rates fell sharply during the year through January for all types and terms of loan.

What should immediately come to mind is the large gap between existing loans and new loans. The differences are listed below.

Homeowner Mortgages:

  • Floating rate: new loans = 2.79%; existing loans = 3.14%; difference = 0.35%.
  • 3 years or less fixed: new loans = 2.10%; existing loans = 2.73%; difference = 0.63%.
  • More than 3 years fixed: new credits = 2.00%; existing loans = 2.27%; difference = 0.27%.
  • Interest only: new loans = 3.25%; existing loans = 3.77%; difference = 0.52%.
  • Main interest: new loans = 2.45%; existing loans = 2.96%; difference = 0.51%.

Mortgage loans to investors:

  • Floating rate: new loans = 3.08%; existing loans = 3.49%; difference = 0.41%.
  • 3 years or less fixed: new loans = 2.54%; existing loans = 3.11%; difference = 0.57%.
  • More than 3 years fixed: new loans = 2.33%; existing loans = 2.64%; difference = 0.31%.
  • Interest only: new loans = 3.63%; existing loans = 3.03%; difference = 0.60%.
  • Main interest: new loans = 2.80%; existing loans = 3.26%; difference = 0.46%.

As you can see, serious mortgage savings are available if you are looking to refinance.

For example, a homeowner with a $ 500,000 mortgage who refinances a typical existing variable mortgage at 3.14% to another provider at 2.79% could save about $ 1,750 per year on interest payments. Obviously, if they shop around, they could find an even lower rate and save more.

They could also switch from variable to fixed, thus achieving greater mortgage savings.

The point is, it’s worth shopping around for a better deal. Or at least call your lender and see if they’ll drop your mortgage rate.

Unconventional economist
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