From Fannie Mae and Freddie Mac to the National Association of Realtors, experts are predicting that home loan interest rates will remain under 4% as we start 2020. Did you know that a difference of as little as one-tenth of one percent could make a difference in your monthly payments, and it could also save you a lot of money over the life of your own?
Chances are, interest rates won’t rise as high as they did in the early 80s, when they ranged between 16 and 18% for three years. But as recently as 2018, they were well over 4%.
How much could an interest rate reduction save?
Let’s say you’ve had your mortgage for a while at 4.5%. Would the savings be worth it to refinance to a mortgage at 3.5% interest if it was available? On a $500,000 30-year fixed rate mortgage, refinancing to 3.5% would reduce your monthly payments from approximately $2,533 to $2,245, a savings of nearly $300 a month ($288). Over the course of a 30-year mortgage, you would pay over $100,000 less in interest with 1% point difference. At .5% less, you would still save nearly $150 a month, and over $50,000 over the life of the mortgage.
You may find that it’s surprisingly simple to refinance your mortgage. If you have an FHA or a VA loan, these programs offer “streamline” refinance options if you are able to reduce your interest rate.
While as recently as 2010, the three biggest banks originated most of the mortgages in the U.S., now there are more choices in mortgage lending and financing. By refinancing your mortgage, you can lock in today’s low home mortgage interest rates and save money on your monthly mortgage payments. If you invest even a part of the money that you save, you’ll be financially far ahead of where you would be if you hadn’t taken that step to reduce your mortgage interest rate.
Sources
https://homeguides.sfgate.com/much-difference-25-make-monthly-mortgage-payment-100688.html [I just did the math myself and rounded the numbers – principal & interest only]
