Many homeowners are taking advantage of today’s low mortgage rates to refinance their home loan to get a lower payment or use the equity in their home. Homeowners are using refinance loans on their existing mortgage to lower their interest rates on their loan amounts, get out of their adjustable rates into a fixedrate mortgage, eliminate their mortgage insurance and much more. While some borrowers may be holding back, thinking they aren’t eligible for a mortgage refinance, one Fannie Mae executive says that's not the case.
In order to help homeowners cope with financial struggles due to the COVID-19 pandemic, Fannie Mae and Freddie Mac put new programs and mortgage requirements in place that would expand refinancing availability to those who wouldn’t have traditionally been eligible – due to low credit scores, insufficient savings for upfront costs or other barriers like lower incomes.
"Many homeowners in low-income brackets may believe they can’t afford to refinance, be convinced they won’t qualify, or be unaware of the potential monthly savings," said Katrina Jones, Fannie Mae vice president of racial equity strategy and impact. "They may be surprised to learn they have options to make their monthly housing payments more affordable, and they can begin by contacting any mortgage lender of their choice to explore refinancing now."
If you're interested in seeing what refinance options are available for your mortgage loan, visit Credible to compare multiple mortgage lenders at once.
Top 3 reasons to consider refinancing now
Jones explained there are three main factors that families should consider when it comes to deciding whether to refinance their financial goals should include refinancing their home loan:
- Refinance rates are low
- They can lower their monthly payments
- It's easy to get started and see if you qualify
"It's important for homeowners to get more information about refinancing, and in particular the new program RefiNow, and then call a lender today to find out what option makes the most sense for their family," Jones said.
1. Refinance rates remain low: Mortgage rates remain near historic lows. The 30-year fixed rate mortgage rate will remain around 3% through the remainder of 2021, before beginning to rise in 2022, according to the Fannie Mae Economic and Strategic Research Group’s May Economic and Housing Outlook.
Homeowners interested in refinancing into a lower interest rate can check out Credible to compare mortgage rates across multiple lenders and get pre-approved in minutes.
2. Lower your monthly payments: Refinancing at a lower interest rate may help decrease your monthly mortgage payment. Fannie Mae and Freddie Mac’s new low-income refinance program could save borrowers between $100 to $250 per month, according to the Federal Housing Finance Agency.
Jones explained that refinancing to change your loan terms may also help you reduce the total amount of interest you pay over the life of the loan, depending on the new loan terms.
If your financial goal is to reduce your monthly payments or save money, you’ll need to use an online mortgage calculator to determine if refinancing your home is a good option. You can head to Credible to crunch the numbers and determine your estimated monthly payment.
3. Getting started is easy: It's easy to see if you qualify for or would benefit from a mortgage refinance. Reach out to the mortgage lenders of your choice to determine the best refinance option and terms for your situation.
"We are working with our lender partners to mobilize around this new program, ensuring homeowners can take the first step to inform themselves through our Know Your Options site, as well as helping them get working with their own advocates," Jones said. "Ideally, that's exactly what we're trying to do here but we work with our lender partners, getting folks to take the first step, drive the call to action, get educated, get comfortable, get informed and equally as important, call a lender and start to explore your options."
How to know if you should refinance your mortgage
Jones explained that interest rates alone can’t determine if a borrower should refinance their existing mortgage, and there could be a number of reasons why refinancing is a good choice.
"When you refinance a mortgage, what you're really doing is replacing the mortgage you have now with a new mortgage loan that has new terms that better fit your financial goals," she said. "If you have a high interest rate mortgage, or an adjustable-rate loan, or maybe your payments are just becoming unmanageable, refinancing may be able to lower your monthly payments, shorten the term of your loan or move you into a more secure loan."
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