When Mortgage Rates Drop
Mar 12 2020
Interest rates fluctuate based on many factors, including inflation, the economy, housing markets and the Federal Reserve’s monetary policy.
So when rates drop – especially to historic lows – you can potentially save thousands of dollars over the life of the loan by locking in a low rate.
Should I refinance my home loan now?A good rule of thumb is to consider refinancing if your mortgage rate is more than 1% higher than current rates. Even if your current mortgage interest rate isn’t a full percentage point above current rates, you may still benefit. It may be a good time to refinance if:
- It’s been several years since you bought or refinanced your home
- You want to shorten your term to a 15-year or 20-year home loan or lower your mortgage payment
- You have an adjustable rate mortgage and plan to stay in your home longer than initially planned
- You have a sizable expense (college, home remodel, etc.) coming up in the near future
- You want to pay off higher-interest rate debt (by pulling equity out of your home during a refinance)
🧮 Our helpful refinance calculator will tell you if the amount you save in interest will exceed those refinancing costs.
Keep in mind that every situation is different, so while these are good guidelines, it never hurts to get some professional advice. You might be surprised how you could benefit from potentially refinancing your home loan, and our mortgage bankers are always willing to walk with you about your unique situation.
What you need to refinance your mortgage
Ready to take action? We look at your entire situation to determine the best options to save money and put you closer to your financial goals.
If you’re ready to refinance, or if you want to learn more about rates and whether now is a good time to refinance, reach out to your trusted mortgage loan officer.
Here are some documents you may need to refinance:
Legible copy of photo ID for each borrower
W-2s or federal tax returns
Current pay stubs covering the most recent 30-day period
Bank statements for the past two months
Copy of current mortgage statement
Name and contact information for home owner’s insurance agent
Should I buy a house now?
If you’ve been on the fence or seriously considering buying a home, doing so when rates are low can save you money over time.
But homes can also be expensive. When moving from an apartment into a house, it’s not enough to figure out how much mortgage you can fit into your budget. There are extra expenses in home ownership you likely didn’t have to pay when renting.
Make sure to calculate these costs when you figure out whether you’re ready to buy a house:
- Utility bills Many landlords pay some utilities. When you own a house, they’re all your responsibility, and chances are they’ll be a little higher than what you paid in an apartment. In addition to the expected expenses like electricity, gas, water, cable and internet, expect to be charged for things like trash collection as part of your utility bills.
- Yard care You might be dreaming of your own yard where you can grill, landscape or grow a garden. Keep in mind that you’ll have to buy the tools you need to maintain your yard. Lawn mowers (and snow blowers in colder climates!) can be expensive, and you’ll likely also need basic supplies like hoses, shovels, rakes and brooms.
- Maintenance Anything you used to call the maintenance department for when you lived in an apartment – overflowing toilet, clogged garbage disposal, ant infestation – you’ll have to either pay for or handle yourself when you own your home. Even if you do the repairs yourself, you still have to pay for the tools and supplies you’ll need. There are costs for general upkeep, such as staining your deck, resealing your driveway, repairing your roof, replacing filters and patching and painting your walls. Not all homes come with a washer/dryer and dishwasher, so you may need money for those appliances up front. Even if your home is fully equipped, it’s a good idea to budget for repairs so you’re not caught off-guard if your furnace, air conditioner or hot water heater breaks down. And if you have a basement, you may need to consider purchasing a dehumidifier and sump pump, too.
There are a lot of costs to home ownership, but there are also a lot of benefits, from having a place of your own to building equity.
🧮 Our handy mortgage calculator can help you figure out how much home you may be able to afford.
When you’re ready to buy, the best thing to do is start with a preapproval from a trusted mortgage lender, so you know what your budget is and you won’t miss out on being a contender for a home if you find one you want to make an offer on. Contact one of our mortgage experts to get started!
Mortgage Shopping? Know Your Rates
When comparing loans, it’s important to look at the APR (annual percentage rate) and interest rate – even if you’re quoted the same interest rate from different companies.
What’s the difference between APR and interest rate?
The nominal interest rate is the percentage charged for borrowing money. When shopping for a mortgage, you’ll generally be quoted an interest rate. It’s considered the base rate, or starting point, which directly affects the monthly loan payment.
The APR is the rate calculated when the fees associated with making the loan are added to the original loan amount.
Why does APR vs. interest rate matter?
The fees charged can change from lender to lender, and the fees associated with the APR can vary as well, so the APR may not be the same even if the interest rate is. The APR calculation also assumes you will keep the loan for the duration of the term and is calculated to reflect that.
Lenders are required to disclose a truth-in-lending form to all borrowers showing the loan’s APR. Looking at your interest rate, loan fees and APR will give you a better understanding of what the loan will cost you over the long term.
It’s also important to ask about an origination fee – that’s the fee a lender can charge to process the loan. Bell Bank Mortgage’s no origination fee program can save qualified home buyers thousands because they’ll need less cash to close.
Our mortgage experts can answer all of your loan questions – including about rates and fees. Just call or email us for the answers you need.
How to choose the right mortgage lender
It might seem easier – or more convenient – to shop for your mortgage online. But there are 3 big advantages to working with a local, reputable lender on what is likely one of the biggest purchases of your life.
- Local lenders know the market. Not only do they regularly work with local appraisers, title companies and agents, but they’ve also likely driven through the neighborhoods, walked the nearby parks and shopped in the local stores.
- You can meet with local lenders face to face. A mortgage can be complicated. It’s easy for misunderstandings to happen through email or over the phone. But when you can meet with a lender face to face, you can clear up a lot of that potential confusion.
- Local lenders are available if something goes wrong. If there’s an issue with your appraisal or closing, a local lender who has formed a relationship with you and understands your situation is more likely to be able to help you than a call center that may or may not be open.
There’s something to be said for working with a lender who cares about you – not just your loan – and who will walk you through the mortgage process, providing unequaled personal service along the way.
What are today’s mortgage rates?
Contact a mortgage lender in your area for the latest mortgage rates:
How are mortgage rates determined?
If you’re talking to others about interest rates, keep in mind that the rate one person gets isn’t necessarily the rate someone else will receive. Many variables go into determining an interest rate, including:
- Type of loan
- Credit score
- Value of your home
- Home’s location
- Loan amount
- Down payment amount
- Length of loan
- Purpose of loan
How long will rates stay low?
We never know when rates will change. If you’re considering buying a home or refinancing your mortgage, we recommend meeting with a mortgage lender right away, so they can work with you to find the best solution to help you reach your financial goals.
What is the mortgage process?
There are 4 main steps in the mortgage process:
- Talk to a loan officer
A mortgage professional will help you determine your financing options and answer all your questions.
- Apply online
Complete your mortgage application at your convenience through our online application.
- Work together through final approval
From the time your application is received, we work with you to ensure you move through the process checkpoints to final approval.
- Close on your loan
Your final step is to sign your documents, close on your loan and receive the keys to your new home!
Prior to loan closing, your loan officer will review the closing disclosure, funds needed, and documentation to bring to close with you. At Bell, we pride ourselves on getting your documents to the title company a week prior to closing, so you can get your keys to your new house with little to no stress.
How much of a down payment will I need?
You’ll probably need less of a down payment than you might have heard. Typical down payments range anywhere from 3 to 25% of the home’s total value. The more you put down, the less your monthly payments, and with more than 20 percent down, you won’t need to add mortgage insurance to your monthly payment. Ask your loan officer about what options make sense for you.