With today’s mortgage rates at historic lows, you may be thinking about refinancing your mortgage to lower your monthly payments and improve your financial situation.
When refinancing your mortgage, you are essentially applying for a new mortgage to replace your current one, which will provide you with a new rate, term and monthly payment. If you decide to refinance, be sure to shop around for the best rate and term for your needs.
With the most common no cash-out refinance, you are primarily refinancing the remaining balance on your mortgage. Consider, the following example when refinancing a $200,000 outstanding loan balance into a 30-year fixed-rate mortgage at various rates.
|Mortgage Rate||Monthly Mortgage Payment (P&I)|
Source: Freddie Mac Primary Mortgage Market Survey® (PMMS®). Tracking through the PMMS began in March 1971. Mortgage payments are principal and interest only, based on a $200,000 fully amortizing mortgage. All terms are assumed to be 30 years. FreddieMac.com/pmms/
Refinancing During COVID-19
If you have been approved for one of Freddie Mac’s relief options, and you are current on your mortgage, you can still take advantage of today’s low mortgage rates. You may also be eligible if you missed payments but subsequently reinstated your mortgage or made three straight months of timely payments.
As you can see, slight differences in mortgage rates have an impact on your monthly payment. At the recent 50-year low average mortgage rate of 3.15%, your monthly mortgage payment would be $859. With rates at or near historic lows, refinancing could help you save by reducing your monthly payments and reducing the total amount of interest that you pay over the life of the loan.
While refinancing your mortgage could save you money, both in the long- and short-term, it isn’t free. Just as you had closing costs and associated fees with your current mortgage, there are refinancing costs. To get a sense of what refinancing could cost you, check out our refinance calculator.
You should work closely with a lender to discuss refinancing options that fit your financial goals. You can refinance through your existing lender or a new lender but remember to be patient because call volume is at an all-time high. What’s most important is that the lender you choose is trustworthy and offers competitive rates and terms.
If you are facing financial hardship, help is available. For more information on COVID-19 housing relief, visit My Home by Freddie Mac®.