Hey guys. It’s Kirk Brewer, the Loan Geek here, with this week’s Mortgage Tip of the Week. This week, I would like to talk to you about MORTGAGE INTEREST RATES.
You guys may have been hearing all over the news, all over social media, the internet, the financial news networks that interest rates are back down near historic lows and that’s true.
What I would like to do here today is take that discussion the next step further and explain what lower interest rates may mean to you in two different scenarios.
Number one, maybe you’ve been on the fence, considering going out and buying a home; and number two, you may already own a home and you’ve been contemplating a refinance.
In the first scenario, what do lower interest rates mean to you if you are in the market to purchase a home? Well, the common understanding would be that a lower interest rate is going to equate to savings. That is indeed true.
If you are going to buy a home at the same purchase price, you will SAVE MONEY and interest at a four percent interest rate versus a five percent interest rate and those savings could be substantial. They could be hundreds of dollars a month. These interest savings could equate to thousands if not tens of thousands of dollars saved over the life of the loan.
But one thing a lot of folks don’t talk about is lower interest rates also equate to more BUYING POWER. What I mean is this. For your income level, you qualify to buy more house at a lower interest rate. You qualify to buy a more expensive house at four percent than you would at five percent for your income level.
So between savings and more buying power, in today’s low interest rate environment, it is a great time if you’ve been thinking about buying a home to get serious and get off the fence.
The first step in that process is to get with an experienced mortgage lender and get pre-qualified.
Now in the second scenario, we were going to talk about if you already own a home and you’ve been contemplating a refinance. The common reason to refinance would simply be interest rates today are lower than where your current interest rate is, so you can refinance to a lower interest rate and realize monthly savings. That is a great reason to refinance and typically the most common.
But there are several other reasons why today’s low interest rate environment may make it a good time for you to consider refinancing as well.
For instance, let’s say you purchased your home here in the last couple of years and you did not put a full 20% or more down. Then you’re likely carrying mortgage insurance.
Now over the course of these last couple of years, your home may have appreciated in value to a point where you could greatly reduce if not completely eliminate your mortgage insurance.
So combined with the interest rate savings you could realize today, you could have substantial savings that you could realize by refinancing. In addition, you may want to refinance if you’ve been considering doing some remodeling or some improvements to your home. Or, you may have some high interest debts like auto loans or credit cards that you would like to get rid of and consolidate. Or, you may have a child that’s getting ready to head off to college and you would like to be able to help them out with their college tuition.
All of these reasons may be good reasons to do a cash-out refinance and tap into the equity in your home while mortgage interest rates are low. In any one of those cases, again, you’re going to want to work with an experienced mortgage professional who can walk you through every step of the process.
So if you have any more questions on this or any other mortgage related topic, go to our website www.LoanGeeks.com, or reach out to us directly. And if you want to get the process of buying or refinancing started, just give us a call or shoot us an email. We will be happy to walk you through the process.
Thanks for tuning in to this week’s Mortgage Tip of the Week. We will talk to you again soon.