The Impact of COVID-19 on Home Refinancing

Posted on June 1, 2020

Coronavirus or COVID-19 has swept the country, causing economic shut-downs and unemployment throughout the United States. Astonishingly, 20.5 million Americans lost their jobs in April. The unemployment rate has soared to nearly 15%. Much of the United States remains under some sort of shut down order. 

With so many retail stores, restaurants, and businesses closed, many employers have laid off their employees or closed down their businesses entirely. In only two months, coronavirus has canceled nearly a whole decade of job gains from after the Great Recession. Many Americans are interested in refinancing their home loans, but they remain uncertain in these tumultuous times. 

 

Current Mortgage Rates

The economic downturn has also caused mortgage rates to decrease. As of this writing, the average rate for a 30-year fixed-rate mortgage has dropped to 3.51% from 3.69%. The average mortgage rate for a 15 month has increased by 1 basis point from a week ago. 15-year mortgage rates are currently at 3.12%. 

 

This Could be a Good Time to Refinance Your Mortgage

We are currently living in uncertain economic times. When the economy becomes unstable, mortgage rates tend to fall lower. Now could be a good time to consider home refinancing. There are always some risks when it comes to refinancing your home loan. With the proper research and guidance, however, refinancing your home can save you tens of thousands of dollars or more over the course of your loan.

 

COVID-19 and Home Interest Rates

Before you consider refinancing your home, you need to make sure that the rates are low enough to make it worth your time, energy, and effort. COVID-19 has caused markets to fluctuate wildly and be as volatile as they have ever been. Financial experts have never seen a situation exactly like this pandemic before. That is why it is hard to tell where the bottom of the stock market will be. 

Mortgage rates are also extremely volatile right now and they are dependent on the whims of investors. More people than usual have been getting out of the financial markets entirely. Many people have gotten out of the stock market and started investing in precious metals and other, safer investments. 

 

Lenders Might Choose to Raise Their Rates 

The Federal Reserve has left the interest rates on short-term loans at or near zero. People are more aware that mortgage rates are lower due to volatile market conditions. The demand for refinancing has increased. More people than ever want to refinance their home loans and save money. As a result, mortgage lenders might choose to raise their rates because of the large demand. 

 

Factors to Consider When it Comes to Refinancing Your Home

The refinance rate is still low. For most people, their homes are their biggest financial investments. The equity in your home can be extremely useful as a resource during times of trouble. If you are considering doing a home-refinance, you should take the following steps to make sure that a home refinance is the best move for you. 

 

Do You Plan on Staying in Your Home a Long Time?

Before you refinance your home, consider how long you anticipate living in your current home. If you plan on moving sometime in the next five to 10 years, you may benefit from refinancing with an adjustable-rate mortgage (ARM). You will be able to get a lower rate with an ARM initially. After the initial low rate, the loan company can adjust and raise the rate. In other words, the rate is not fixed with an ARM. If you move before the end of your fixed-rate period, you will not need to be concerned about paying a mortgage at a higher rate. 

Payments are often lower when it comes to adjustable-rate mortgages because they are based on 30-year periods. If you plan on living in your home for a long time, of at least 10 years or more, then you should probably consider refinancing with a 15-year mortgage or a 30-year mortgage. 

 

What is the Age of Your Current Home Loan?

Sometimes, the age of your current home loan plays a role in whether or not you should refinance your home mortgage loan. Sometimes refinancing does not make sense, even if you will save money. For example, if you recently bought your home or you recently refinanced your home, you might be subject to a waiting period. You should also consider the closing costs of refinancing your home. 

 

Make a Plan for the Money You Will Save by Refinancing

Many people want to refinance their homes so that they can save money every month. If you are refinancing for the purpose of saving money, come up with a plan for your savings before you sign the refinancing documents. Keep in mind, that nobody knows for sure exactly when the coronavirus pandemic will end. We also do not know how severe the economic consequences will be over time. Many people are wisely using the money that they save to build up their emergency funds. Emergency funds are more important than ever as people do not know whether or not they will lose their job. Or, you might choose to save and pay off some of your high-interest debt. 

 

Talk to a Mortgage Expert

Refinancing needs to make financial sense. Before you refinance, you need to make sure that you will have a tangible financial benefit. Factor in all of the expenses that you will need to pay upfront while you are refinancing your mortgage. 

In volatile markets, it is important to speak to an experienced mortgage expert before making any major decisions. At Justice Roberts, our Federal Way mortgage team can help you decide whether or not you will benefit from refinancing your mortgage during these uncertain times. Call 206-408-1241 today to contact our re-finance team to schedule your appointment with one of our experienced and skilled mortgage lawyers. Or, fill out our easy online application to get started.