Interest rates open new opportunity

Mortgage rates have been trending down in recent months, which is creating money-saving opportunities in the real estate market.

OK, some of you might be tempted to yawn at such a matter-of-fact statement. “Boring. Old news. Get back to me when rates are setting new record lows.” 

Time for some perspective.

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Think back to the waning days of 2018, when we were reading warnings of a coming nationwide slowdown in real estate as mortgage rates ticked up near 5 percent for 30-year fixed loans. Fast forward to mid-June and average rates were down in the high 3s, registering 24-month lows. With peak buying season upon us, these low rates are continuing to play a major role in a robust Northern Colorado market.

Now, about taking advantage of those interest rate opportunities we mentioned at the outset. Let’s take a closer look at what’s out there:

Stay the course

You may be entirely content in knowing you are locked into a low rate, happy with your current home, and in possession of a sound investment portfolio. As you see it, you’re not going anywhere. If that’s you, then by all means sit back and enjoy the fruits of what you’ve accomplished and the lifestyle you’ve created for yourself.

Refinance to lower your payment or to pay off your loan faster

As of 2016, 17 percent of all homeowners (12.9 million) held a mortgage with an interest rate above 5 percent. Considering that rates were regularly below 4 percent beginning in 2012, this is a group of owners who apparently missed out on opportunity to refinance. That window is back open. The Joint Center for Housing Study Data reports that for any owner carrying a mortgage balance of $50,000 or more, shaving 1 percentage point off your loan is worth the costs of refinancing. While this would create a modest savings, we believe in a more conservative approach in order to receive the benefits of a refinance.  Even if you just bought a newly constructed home late last year, odds are today’s rates are a full point lower than where you started six months ago, making it worthwhile to refinance.

Bottom line, you’re in a position to lower your monthly payments or reduce the term of your loan. 

Tap into home equity

We always caution owners to be smart about drawing on their home equity. Still, existing low rates provide the chance to pay off higher interest debts, such as credit cards and student loans, and lighten your monthly bills.

Change your loan type

If you’re holding an adjustable rate mortgage (ARM), this could be an ideal time to transition into a fixed rate mortgage, providing the benefit of a long-term locked rate at near historic lows.

Remove your private mortgage insurance (PMI)

If you’ve reached the threshold of 20 percent home equity, refinancing can allow you to remove your PMI and lower your monthly payments.

Renovate your home with proceeds from refinancing 

You love your home and want to stay put, but there have been some upgrades you want to make. By taking advantage of the low-rate environment, you can roll the costs of those improvements into a lower-cost loan.

Brandon Wells is president of The Group Inc. Real Estate, founded in Fort Collins in 1976 with six locations in Northern Colorado