Blog – Page 22 of 871 – Fred Gruber - First Rate Financial Group

28

Jan

Home Mortgage Tips

What to Do If Interest Rates Drop After Getting a Mortgage

When securing a mortgage, buyers aim to lock in the best possible interest rate. But what if interest rates fall after you’ve closed on your loan? Are you stuck with your current rate? The good news is that you may have options, whether your loan is brand-new or you’ve been paying it off for a while. Here are three ways to take advantage of lower rates.

1. Explore a Float Down Option

Many borrowers choose fixed-rate loans for stability—they protect you from rising rates. However, if rates drop, your fixed rate stays the same.

This is where a float down option can help. Some lenders offer this as a one-time opportunity to reduce your interest rate without refinancing. While the rest of your loan terms remain the same, the lower rate could save you money over time.

Because this option can only be used once, timing is crucial. Be sure the potential savings justify the decision, and consider working with your lender to understand the terms and conditions before proceeding.

2. Refinance Your Mortgage

Refinancing is the most common way to capitalize on lower interest rates. This involves replacing your current loan with a new one at a better rate. The new loan pays off your old mortgage, and you start with fresh terms.

Refinancing offers more than just interest rate savings. You could:

Adjust the loan term to pay off the mortgage faster or reduce monthly payments.
Remove private mortgage insurance (PMI) if you’ve built sufficient equity.
Change borrowers on the loan if needed.

However, refinancing isn’t without costs. You’ll need to cover new closing fees, which could offset your savings if the rate drop is minor. Generally, a reduction of at least 0.5% to 1% is necessary to break even on the costs and start saving. Additionally, refinancing restarts the amortization schedule, meaning you’ll pay more interest upfront in the new loan’s early years.

3. Inquire About Loan Modifications

Loan modifications are another option to lower your interest rate. These programs are typically offered to borrowers facing financial challenges, such as a reduction in income or an inability to qualify for refinancing.

With a loan modification, the lender agrees to adjust the loan’s terms—such as lowering the interest rate or extending the repayment period—to reduce the risk of default. While these programs gained attention during past recessions, they may still be available even in stable economic conditions.

If you think a loan modification might work for you, contact your lender to discuss their specific requirements. Some programs are also supported by government initiatives to help homeowners remain in their properties.

Where to Start

If interest rates fall after you’ve secured a mortgage, you don’t have to feel stuck. Whether it’s exploring a float down option, refinancing, or pursuing a loan modification, there are ways to reduce your rate and save money.

Give us a call. We can review your current loan, discuss potential options, and guide you toward the best decision for your financial situation. With the right plan, you can make the most of favorable rate changes and keep your financial goals on track.

27

Jan

By Fred Gruber

Financial Reports

What’s Ahead For Mortgage Rates This Week – January 27th, 2025

With the holiday of the previous week in addition to an extremely light release week, only the Consumer Sentiment report is weighing in on the lending markets. With both the inflation reports showing inflation cooling off, there is still some optimism about where the Federal Reserve will take things. This optimism is only cooled by the uncertainty the new presidency will bring. Many markets have responded in kind, with lending partners showing a trend of increasing rates and other markets preparing for uncertainty. Within the next few months, we will see how the new administration intends to handle monetary policy. This will have a greater impact than the Federal Reserve on the direction things will be headed in the future. Next week will be the first FOMC Rate Decision of the year, with many being optimistic about a potential rate cut with the recent inflation data.

Consumer Sentiment (Univ. of Michigan)

Consumer sentiment fell for the first time in six months, edging down 4% from December. While assessments of personal finances inched up for the fifth consecutive month, all other index components pulled back. Indeed, sentiment declines were broad-based and seen across incomes, wealth, and age groups. Buying conditions for durables softened but remained about 30% better than six months ago amid persistent views that purchasing now would avoid future price increases.

Despite reporting stronger incomes this month, concerns about unemployment rose; about 47% of consumers expect unemployment to rise in the year ahead, the highest since the pandemic recession. January’s data closed on Inauguration Day, and consumers of all political leanings will continue to refine their views as Trump’s policies are clarified and implemented.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw a decrease of -0.11% with the current rate at 6.16%
• 30-Yr FRM rates saw a decrease of -0.08% with the current rate at 6.96%

MND Rate Index

• 30-Yr FHA rates saw an increase of 0.07% for this week. Current rates at 6.54%
• 30-Yr VA rates saw an increase of 0.07% for this week. Current rates at 6.55%

Jobless Claims

Initial Claims were reported to be 223,000 compared to the expected claims of 221,000. The prior week landed at 217,000.

What’s Ahead

The FOMC rate decision is scheduled for next week, while the Federal Reserve’s preferred inflation measure, the PCE Index, will be released at the end of the week. Additionally, the Personal Income and Spending report, a key forward indicator of future economic trends, is also set to be released. Finally, the Chicago Manufacturing PMI data is expected to be published.

24

Jan

By Fred Gruber

Mortgage Tips

How to Refinance Your Mortgage

Refinancing your mortgage can be a strategic financial decision, enabling you to save money, access home equity, or adjust your loan terms to better suit your current financial situation. Here’s a detailed guide to help you understand the process and determine if refinancing is the right move for you.

What is Refinancing?

Refinancing involves replacing your existing mortgage with a new one, often with the goal of:

Securing a lower interest rate.
Adjusting the loan term, either shortening or extending it.
Switching from an adjustable-rate mortgage (ARM) to a fixed-rate loan for more predictable payments.
Accessing home equity for major expenses like renovations, education, or debt consolidation.

It’s important to clearly define your financial goals before starting the refinancing process.

Steps to Refinance Your Mortgage

1. Review Current Interest Rates

One of the primary reasons homeowners refinance is to take advantage of lower interest rates. Even a small reduction in your rate can lead to significant savings over the life of your loan. For example, lowering your rate from 5 percent to 3.5 percent on a $250,000 loan could save you over $200 a month.

2. Evaluate Your Financial Health

Lenders will assess your financial profile to determine your eligibility for refinancing. Key factors include:

Credit Score: A strong credit score (typically 700 or higher) can help you qualify for the best rates.
Debt-to-Income (DTI) Ratio: Lenders prefer a DTI ratio under 43 percent, showing you can manage additional debt.
Home Equity: Most lenders require at least 20 percent equity in your home for a traditional refinance.

3. Compare Lenders and Offers

Not all lenders provide the same rates or terms, so it’s essential to shop around. Some lenders might offer lower closing costs, while others may provide better interest rates. A mortgage broker can help compare multiple options to find the best fit for your needs.

4. Understand the Costs

Refinancing comes with upfront expenses, including:

Closing Costs: These typically range from 2 to 5 percent of the loan amount.
Appraisal Fees: A new appraisal may be required to determine the current market value of your home.
Prepayment Penalties: Check if your current mortgage has fees for paying off the loan early.

Ensure that the potential savings from refinancing outweigh the costs. A good rule of thumb is to refinance if you plan to stay in the home long enough to recoup these expenses.

5. Gather the Necessary Documentation

To streamline the application process, have the following documents ready:

Pay stubs and W-2 forms or tax returns.
Recent bank statements.
Proof of homeowners insurance.
Information about your current mortgage.

6. Close the Loan

Once approved, you’ll finalize the new mortgage by signing the loan documents and paying any applicable closing costs. Your new lender will pay off your old mortgage, and your refinancing journey will be complete.

Benefits of Refinancing

Refinancing can offer several advantages, including:

Lower Monthly Payments: Reducing your interest rate or extending your loan term can make monthly payments more affordable.
Faster Loan Payoff: Switching to a shorter loan term allows you to pay off your mortgage faster, potentially saving thousands in interest.
Access to Equity: A cash-out refinance can provide funds for major expenses or debt consolidation.

Is Refinancing Right for You?

Refinancing can be an excellent financial tool, but it’s not suitable for everyone. Consider factors such as your financial goals, the costs of refinancing, and how long you plan to stay in your home.

Give us a call to explore your options and determine if refinancing is the right choice for your situation.