Consider giving yourself the gift of mortgage savings this year


Here’s a parody based on the Christmas standard “Have a Merry Christmas”: “Treat yourself to a new mortgage refinance. Let your rate be low. From now on, your savings will start to grow. “

Traditionally, the holiday season is a time when the home buying market slows down. That often means lenders have additional capacity to process refinance applications, which can lead to a faster time to closing. Mortgage rates may also trend even lower, as mortgage companies look to attract customers to keep all the new hires they hired to process applications busy.

While almost nothing in 2020 is normal, this winter may be a great time to refinance your mortgage if you haven’t done so recently. Interest rates continue to float near record lows, so you can give yourself the gift of savings if you act early.

“Homeowners can take advantage of the low-rate environment by refinancing their mortgage, generating hundreds of dollars in savings each month and tens of thousands of dollars in savings over the life of the loan,” says Bankrate Chief Financial Analyst Greg McBride.

Here’s what to know about the state of the mortgage industry if you are considering applying for a new loan.

Big savings in store for refinancers

Bankrate has written a lot in recent months about how historically low interest rates have fueled a mortgage refinancing boom, saving many borrowers significant sums as a result.

Still, we’ve reported that nearly 20 million current qualified mortgage holders have passed up the opportunity to refinance, potentially leaving cash on the table.

“It’s still a good time to refinance,” said Joel Kan, associate vice president for economic and industry forecasting for the Mortgage Bankers Association. He said that for most borrowers, now is a good time to shop around and see if you can get a rate that will save you enough money to justify the upfront costs of a refinance.

“It’s less about waiting or hitting the bottom in terms of the lowest rate ever. This is more: let’s find the best rate that works for us, ”said Kan.

Each borrower’s situation is different, so it is important to determine how much you will need to save to make the refinance worthwhile. That can also be affected by how long it will take you to recoup your startup costs.

The housing market is still hot

A key difference in the mortgage industry this year is that the normal winter slowdown has not occurred as decisively on the buying side.

“Things are still working quite well at the moment,” Kan said. “Both purchases and repairs are running at a high rate when you look at 2020 relative to 2019,” he added. “On the shopping side, typical seasonal patterns have been distorted in a sense.”

Compared to other years, that could mean longer processing times for refinances this winter, but the good news is that lenders have largely removed the backlog from the early days of the refinancing boom.

“Capacity constraints were a major challenge before and that has eased a bit,” Kan said. “Whether it’s from staffing or the increased efficiency we got from six to nine months of this experience, response times and the customer experience side are improving.”

He noted that many lenders had big hiring binges earlier in the year to deal with a flood of new loan applications.

Rates may only stay this low for a little longer

Perhaps the best reason to refinance this winter is that the long streak of historically low interest rates may come to an end soon, although rates are expected to remain relatively low overall.

Kan said MBA expects interest rates to rise in 2021, with more pronounced spikes in the latter part of the year.

While even those higher rates will be low by historical standards, if your primary goal with a refin is to get the lowest rate possible, it’s best to act soon.

“This is not a big increase, we are not talking about a full percentage point,” Kan said.

That’s in line with a recent forecast from CoreLogic, which calls for rates to stay around 3 percent through 2021.

Bottom line

Several factors are converging this winter that could make it a good time for many homeowners to refinance their mortgages.

Rates should remain near record lows for at least a few more months, and many lenders have improved their application processing capabilities, which should ease the process and speed up the term for many loans.

If you are considering refinancing, be sure to shop around to find the best deal. Calculate all the costs associated with the quotes you receive and verify that you will save enough and not pay upfront costs soon enough that it is worth the fees and hassle.

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