Money Matters: A look at mortgage rates, home loans and refinancing
I remember the first home my wife and I bought a home here in Toledo. We left the closing table high-fiving each other because we got a 30-year mortgage at 6.75 percent. It was a duplex, where we lived in half and rented the other half out, which basically paid our mortgage. We bought the house for $60,000 and sold it a few years later for $98,000.
Flash forward to today, and we are in our third home in another hot real estate market. For first-time homebuyers or anyone who purchased a house in the past year, it is a good time to pay attention to rates and be prepared.
According to the Mortgage Bankers Association’s seasonally adjusted index during the first week of August 2024, there was a 35 percent increase in applications to refinance. Over the past 30 years, my wife and I refinanced our mortgage loan a few different times. I reached out to Liz Terwilliger, branch manager at Union Home Mortgage in Perrysburg to get some pointers on what to consider when refinancing.
Rates are just beginning to come down, so depending on where you’re sitting, you may want to wait to refinance.
Liz Terwilliger
“If your rate is in the eight’s or higher, it would not be a bad idea to look at doing something now. If you’re in the seven’s, I personally think it’s in your best interest to hang tight because rates are expected to continue falling throughout 2025.”
“What you want to avoid,” she went on to say, “is having to refinance more than once because there are costs associated with a refinance, and you don’t want to pay those twice. Finally, be cautious with lenders that offer a ‘free’ refinance. Typically, those programs do not offer the best market rate available. Many of those lenders will give a slightly higher rate to cover the costs of the refinance on the back end.”
Terwilliger said that essentially it looks like it was free, but the consumer pays in the long run. It’s almost always going to be more beneficial for a consumer to take the lowest rate they can, even if that means paying the closing costs.
The recent spike in interest rates hit mortgage rates in October 2023, when the average 30-year mortgage rate in the United States was 7.73 percent. As of Aug. 14, 2024, that rate has dropped to 6.47 percent.
For the homeowner who can afford a higher monthly payment and shorten the loan to 15 years, that rate has dropped to 5.63 percent. It is also important to note that rates can change daily, and a homeowner’s rate will depend upon the property type, down payment amount, and credit score.
Some future home buyers may be waiting if they anticipate that rates will continue to drop and real estate prices might go lower than their record highs. Being patient and finding the perfect house versus overpaying can be a good strategy.
In the meantime, since rates and the total cost is impacted by your credit and down payment, it is a good idea to check your credit and save up for a down payment. Federal law allows you to get a free copy of your credit report every year through annualcreditreport.com. Putting down more than 20 percent not only cuts one’s payment, but can help a home buyer avoid pricey private mortgage insurance, which protects the lender if a borrower defaults on their mortgage.
Checking the local real estate market, I reached out to John Mangas, a broker and co-owner at RE/MAX Preferred Associates.
He said, “With the downward movement with both 15- and 30-year mortgage loan rates, we are seeing homeowners returning to the market. Both Fannie Mae and Freddie Mac have estimated that there are 54 million mortgage-ready millennials just waiting for rates to drop to a level that they find acceptable. This will drive the housing market in the third and fourth of 2024 and beyond.”
As we navigate these fluctuating rates and market conditions, the key question remains: Is it time to buy or refi? With careful consideration and professional advice, you can make the best decision for your financial future.
Securities offered through Peak Brokerage Services, LLC Member FINRA/SIPC/MSRB. Advisory Services offered through The Retirement Guys Formula, a Registered Investment Advisor. America’s Retirement Headquarters and The Retirement Guys Formula are separate and independent entities from Peak Brokerage Services, LLC.
Source: Mortgage Applications Increase in Latest MBA Weekly Survey | MBA
