Homeowners could save an average of $268 per month by refinancing. photo credit: Getty
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Mortgage rates are continuing their downward spiral. According to Freddie Mac, the average rate on a 30-year fixed-rate loan has dropped to just 3.82%—down from 4.54% last June and its lowest point in nearly two years.
The dip presents a prime opportunity for buyers and existing homeowners alike. For those looking to get out of the rent race, it means the most affordable interest rates since September 2017. As Vishal Garg, CEO of digital mortgage lender Better.com, explains, “Now is the most opportune time to get a loan. If you’re renting, you’re simply paying your landlord’s mortgage.”
For those who already own a home, the rate drop could mean serious financial savings over time.
In fact, according to data and analytics firm Black Knight, nearly every mortgage loan originated in 2018 could see a rate drop via refinancing. In total, a whopping 6.8 million homeowners could now qualify for a refinance and save at least 75 basis points—or around $268 per month. Less than two months ago, just 2 million homeowners could see these kinds of savings.
Still, it’s not all about the rate. Refinance-eligible homeowners also have a chance to leverage their home equity. As Garg says, it’s “a rare opportunity for Americans to improve their financial health.”
“If you have any other type of debt—car loan, credit card, student loan—and you own a home, you can tap into the equity of your home to pay off these other higher-interest loans,” Garg said.
But experts caution that Freddie Mac’s average rate is just that—an average. Rates vary greatly from lender to lender, and a borrower’s credit, debts and other factors all play a role in mortgage rates as well. In order to get the best rate possible, Freddie Mac’s Chief Economist Sam Khafer says shopping around is key.
“While the drop in mortgage rates is a good opportunity for consumers to save on their mortgage payment, our research indicates that there can be a wide dispersion among mortgage rate offers,” he said.
Khater estimates the average buyer can save around $1,500 up front by getting just one additional mortgage quote. Over the life of a 30-year loan, shopping around can save buyers more than $44,000, according to LendingTree’s most recent Mortgage Comparison Shopping Report.