According to the latest financial news, this makes the eighth consecutive week where the United States mortgage rates stayed below 3.30 percent. This means that the mortgages rates have hit a new record low mark. Last year around this time the mortgage rates were at 3.84 percent.
This is important as the mortgage interest rate is what determines how much the balance of your loan will grow each month. As your interest rate grows, this can mean more money each month in monthly installments.
Then there is the matter of which type of mortgage you have. If you have a repayment mortgage like most people you will pay a set amount of money each month from the balance plus the interest. But if you have an interest only mortgage, this can mean you will only pay the interest each month and not the capital.
With the fixed rate mortgages, you have a fixed interest rate meaning that you will pay a standard monthly installment each month. This type of loan can last for up to 10 or 15 years. On the other hand, with a variable rate mortgage can mean your interest rate goes up and down each month. In fixed rate loans, the interest rates are usually higher as you are paying for your peace of mind and the fact that you will know what you have to pay each month.
So, depending on your mortgage type, the interest rates have a direct affect on the monthly payments.
Low mortgage rates on the other hand can also propel home sale and the refinance market. In this current environment, the purchase demand activity is up over twenty percent from 2019. It is the highest since last year. Mortgages rates are at an all-time low which means there are more potential buyer out there.
But this trend will not last long as properties supply cannot keep up with the demand. New construction has also halted due to the coronavirus pandemic and people have taken off their houses from the market. This means that there is less supply and more demand, and this is the seller’s market.
Due to the low interest rates, this might be the best time to refinance as well. If the last time you refinanced was in in 2012 or 2013, this might be the time to look at your refinancing options. Odds are that you can get a lower rate than the one you have right now. When you refinance, you will get a new loan and dissolve the previous one and with the new all-time low interest rates, this means you will have to pay less. In refinancing usually, the current outstanding mortgage balance becomes the principal and the loan is re-amortized.
Refinancing your real estate mortgage right now can mean an increased monthly cash flow as you will have to pay less interest on the whole. But before you rush to refinance, you must consider the benefits and drawbacks of refinancing according to your own personal situation.