February 14, 2019, marked a 12 month low in long-term mortgage rates. A slowdown in inflation and economic growth caused rates to fall to the lowest levels in a year. The 30-year fixed rate mortgage dropped to 4.37%, lower than the 4.38% average from a year ago.
If you delayed your new home purchase because of high-interest rates you might want to reconsider. The recent decline in interest rates creates a potential opportunity to purchase a new home and lock in a low rate.
If you already have a home with a mortgage, there are several reasons why you might want to refinance:
Lower Your Monthly Payment
- If you have a mortgage interest rate that is higher than 4.37% (February 14, 2019).
- If you have a second mortgage. These often have a high-interest rate, so you can typically save money when refinancing by combining both mortgage loans into one.
- If you have a home equity line of credit (HELOC). The interest rates on these loans are usually tied to the US prime rate which is 5.5% (February 14, 2019).
- If you are thinking about consolidating your credit card debt, student loans or car loans into a lower monthly payment.
Credit Score Has Gone Up
- Even if rates weren’t at a 12-month low (February 14, 2019), a higher FICO score can allow you to qualify for a lower interest rate.
Stop Paying Mortgage Insurance
- If you have enough equity in your home to refinance and remove your monthly mortgage insurance.
Convert an ARM to a Fixed Rate
- If you have an adjustable rate mortgage (ARM), even if your rate is lower than current mortgage interest rates, refinancing could help you lock in a lower payment and avoid any future increases.
- If you want to make repairs on your home, refinancing can allow you to do so at a lower cost than that of a higher-interest home equity loan.