Mortgage rates vary. Take the pandemic, for example. Interest rates were at an all-time low last year, which is why the housing market saw such a spike. Consumers took advantage of those low rates. Some purchased a new home and others refinanced their mortgage.
According to Freddie Mac, borrowers saved thousands in 2020 by refinancing. But as the world slowly gets back to normal, mortgage rates have slowly been rising. In recent weeks, however, Delta variant fears have been fueling a dip in rates. Is there still time to take advantage of low rates and refinance your home? Keep reading to find out.
Pros and cons of refinancing
Refinancing means taking out a new mortgage loan and replacing it with your current one. One of the reasons why people refinance is to obtain a lower interest rate. With a lower interest rate, homeowners pay less in interest and can even shorten the length of their loan.
While refinancing can be a good way to build equity and manage debt, it can cost money – anywhere between 3% to 6% of the amount of debt you still owe on your current loan. So while you might eventually save money from refinancing, you’ll also spend money on closing costs. For example, to refinance a mortgage you’ll have to pay an application fee, appraisal fee and maybe even attorney fees depending on where you live. There’s also a chance your lender will require another title search and title insurance, which would add to your costs.
Not to mention, If you’re planning on moving, you probably shouldn’t refinance. You also want to make sure the long-term costs won’t be more expensive than potential savings.
Impact of delta variant
With worry surrounding the highly contagious Delta variant, some states are mandating masks again. In fact, some countries are even shutting down their borders in an attempt to slow down the spread. While it’s too early to know the impact this variant will have, if it’s similar to the impact of the COVID-19 pandemic, the housing market might see another surge. And interest rates could take a deep dive again.
Should you refinance?
Even though experts believe mortgage rates will rise in 2021, rates are still historically low. If you’re locked in a higher rate, it may be worth talking with your lender.