Mortgage rates have been hovering between 2% and 4% for the past couple of years, a historic low compared to the 5%, 6%, or even 7% that was commonplace a decade and more ago. However, how long can these low rates last, and is it only a matter of time before they rise again?
At the beginning of 2022, mortgage rates steadily increased as a result of consumer spending and high inflation. In addition, the gradual ease of pandemic concerns also contributed to increased spending. The Russian invasion of Ukraine, however, caused mortgage rates to drop in response to global uncertainty and hesitation.
But this may be the last time we see these historically low mortgage rates, as mortgage rates continue to trend upwards. It’s expected that the Federal Reserve will raise short-term interest rates and attempt to control inflation, which can cause mortgage rates to rise. In addition, as we get into the warmer spring and summer months, real estate markets tend to see an uptake in activity. This may make it doubly as important to purchase now, while rates are low and before it becomes even more of a seller’s market.
No one can predict when mortgages rates will rise, or when they’ll be this low again; it’s up to you to determine whether now is the right time to get a mortgage or refinance on your current home. However, here are four steps you can take to determine if now is the right time to act!
1. Determine your Mortgage needs.
You probably already know the importance of choosing the right home, but did you know that choosing the right mortgage is equally as important? Not every mortgage is the same, and it’s important to find one that works best for you.
For most people, a traditional fixed-rate 30-year mortgage is a good place to start. However, conventional 30-year mortgages require a 20% down payment – something not everyone can (or is willing to) afford. This is where low-or-no down payment mortgage options can be appealing – FHA mortgages require only 3.5% down, while VA or USDA loans require 0% down. If you’re able to afford a higher monthly payment and want to save on total interest plus have a shorter loan term, a 15-year mortgage might be right for you. And if you’re planning on building your home, you might want to consider a construction loan.
There are many factors to consider when choosing a mortgage, but the good news is that you’re not alone - a mortgage broker or mortgage loan officer will be able to talk about your options and your specific financial situation. You can also learn more about the different types of mortgages right here on RateZip.
2. See if Refinancing will Help you Save.
If you already have a mortgage, you can still benefit from historically low interest rates by refinancing. There are many reasons why you might want to refinance, such as getting a lower interest rate, a lower monthly payment, saving on total interest, shortening your loan term, or getting cash out. If you first got your mortgage ten or fifteen years ago when rates were still extremely high, you could be spending more than you need to. Refinancing into a lower interest rate can save you hundreds or even thousands over the life of your loan.
In addition, if you get a cash out refinance or home equity loan, you can tap into the equity of your home. Equity is the percent of your house that you own outright, and as long as you’ve been making steady, reliable mortgage payments for the past years or decades, chances are you have quite a lot of it! You can tap into this equity through refinancing and then use these funds for renovations, tuition, vacations – the choice is yours! But no matter your reason for refinancing, doing it while rates are low can save you money and put more cash in your pocket.
3. Compare Lenders.
Whether you’re looking for a new mortgage or want to refinance, it’s a good idea to compare lenders and find one that you want to work with. (Hint: you don’t have to refinance with your current lender! It may be easier in many cases, as they already have your borrower information, but don’t be afraid to get quotes from multiple lenders to be sure you’re getting the best deal.) In addition to looking at mortgage rates and terms, pay attention to factors such as customer support, locations, options for monitoring and paying your loan, and overall rating. Luckily, you can compare most major lenders right here on RateZip.
4. Shop Around for Mortgage Rates.
Getting a low mortgage rate is usually the best way to save on your mortgage. Even getting a payment that’s just $50 less each month will save you $18,000 over the life of a 30-year loan – so comparing mortgage quotes is definitely worthwhile! If you’re stuck in a mortgage with an interest rate that’s 5%, 6%, or even 7%, you need to see if you qualify for a lower mortgage rate today. You can compare mortgage rates easily and with no obligation, right here on RateZip. Who knows when mortgage rates will be this low again – it's likely they will increase as the year goes on. Act now and see if you qualify!
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