Rates hit record low—should I refinance?

The U.S. real estate market has been the shining star of the pandemic
Get the full scoop on today’s rock-bottom mortgage rates and more

At the start of the coronavirus outbreak, nobody could have guessed how far-reaching the effects would be. The last few months have been defined by economic uncertainty, social unrest, devastating wildfires, and political strife. And until we have a COVID-19 vaccine, the American people are stuck in limbo, wondering whether it’s safe to go outside and return to ‘normal’ society—let alone find a way to line our pockets.

But despite all the chaos and negativity, there has been one bright spot in 2020—the residential real estate market. In fact, we might as well call it a success story.

For the past six months, mortgage rates have fallen to record lows (nine times to be exact).

These are the lowest rates we have seen in almost 50 years. Reason to celebrate, right?

Well, not so fast. It’s somewhat complicated.

Time to jump—or pause?

These discounted mortgage rates are seriously exciting. But hopeful homebuyers are finding that regardless of the loan they procure, today’s sky-high housing demand poses problems.

“Mortgage rates have hit another record low due to a late summer slowdown in the economic recovery,” says Sam Khater, Chief Economist at Freddie Mac. “Heading into the fall, it will be difficult to sustain the growth momentum in purchases because the lack of supply is already exhibiting a constraint on sales activity.”

Severely limited inventory has made finding that dream home more difficult (and costly) than expected. Dwindling supply is partly due to families leaving the cities and escaping to the safe, open spaces of suburbia. But remember: the housing market was heating up way before the onset of the coronavirus pandemic.

Back in March and April, rock-bottom mortgage rates energized market activity even further. Folks who weren’t necessarily looking to buy or refinance saw an offer they couldn’t refuse. The sudden influx of applications forced many lenders to temporarily raise rates as a deterrent. In effect, they needed time to catch up.

But now that things have stabilized, many people are wondering—will rates go even lower? And given the unpredictable nature of today’s economy—is the time right?

Whether you’re contemplating a mortgage refinance or your very first home purchase, Everest has your back. We’re counting down today’s top tips when it comes to the residential real estate market in the age of coronavirus.

3 Things to Consider Before Buying or Refinancing

Tip #1: Don’t wait for lower rates

Experts predict that mortgage rates could dip lower than today’s. Still, it’s impossible to know how things might change over the next year. This pandemic is completely unprecedented, and just because rates tend to follow the federal government’s short-term trends, nothing is guaranteed.

“Technically speaking, mortgage rates could go lower. Theoretically, they could easily drop to around 2%,” says George Ratiu, Senior Economist at Realtor.com. “However, for lenders who set their own rates, the likelihood of rates going much lower is pretty slim. They don’t want to take the risk of a lower rate over the length of the loan.”

For the latest rate changes, visit Mortgage News Daily.

Tip #2: Do your math

If you’re a current house hunter, don’t be blinded by a good bargain! Even though today’s mortgage rates are extraordinarily appealing, limited inventory has home prices surging 11% over last year. It’s important to make sure that your rock-bottom mortgage rate is low enough to offset the inflated cost of the home.

Once you run some calculations, you may realize that you’re better off now than before the pandemic! Many homebuyers have finally been able to afford their dream homes—and it’s all thanks to today’s super competitive rates. So, the answer is yes. Make your move, but not before assessing your own financial fitness and whether or not you can meet this major monthly obligation.

For a fast mortgage calculation, visit our mortgage calculator.

Tip #3: Refinance now

While purchasing decisions are impacted by inventory, the decision to rework a current mortgage doesn’t have such a strong tie to housing availability. The fact is, today’s rates are extremely encouraging. If you’ve been thinking about refinancing, the time is now.

According to Clare Trapasso of Realtor.com, “Homeowners who refinance their existing loans can potentially shave $100—or more—off their monthly mortgage payments.” The exact amount depends upon the size of the loan as well as the previous rate. Regardless, refinancing can help save tens of thousands of dollars over a loan’s lifespan. Our standard residential clients save an average of $400 per month on their refinanced payments.

But don’t forget—rates can change quickly and drastically. According to Ratiu, “You can wait for a basis point lower, but ultimately you have to weigh the trade-off given the fast-rising prices. Home prices are rising fast, so waiting for a lower rate is likely to have little benefit.”

To assess your specific situation, let’s chat.

Everest says: you have the green light