As we close out 2014, home loan rates remain near historic lows. In fact, rates for fixed-rate mortgages are much lower now than they were a year ago! Combine these lower rates with rising house values, and we find ourselves with incredible opportunities to help homeowners save money.
Lower Rates: Looking at the chart provided, you will see that the price of 30-year mortgage bonds has gone up quite a bit in 2014, and simply put…as the price of the bonds increase, the rate you pay on for a 30-year fixed rate mortgage goes down.
Rising House Values: According to Zillow.com, house prices have risen 5.5% in the past year for the Portland Metro market. That means a house worth $400,000 a year ago could potentially be worth $422,000 for a gain of $22,000!
What does all of this mean for you? Well, maybe nothing. But for many, the immediate impact is being able to refinance and take advantage of the current market. Here are some ideas:
- Enough home equity to finally be able to lower your rate and payment: Thousands of homeowners have been unable to take advantage of this low interest rate environment due to having no equity in their home. The rising values are now opening up the door (finally!) for those who used to be “upside down” on their mortgage (i.e. owed more on their mortgage than their house was worth).
- Eliminate mortgage insurance: The rise in values also means you might be able to refinance and eliminate that costly mortgage insurance. Even if you do not 20% equity in your home, there are ways to restructure your mortgage, eliminate or greatly reduce the mortgage insurance, and save hundreds of dollars each month!
- Shorten your mortgage term: Many homeowners are looking forward to retirement, but are unsure how their house and mortgage(s) will play into that. With rates so low, and assuming you have plenty of positive cash flow each month, it might make sense to review your current mortgage repayment plan. For example, we are helping a client with 24 years left on their mortgage, refinance into a new 15-year fixed rate mortgage so they can retire mortgage-free! While the new monthly payment increased a bit, they were more than comfortable knowing that this strategy will potentially save them over $100,000 over the next 15 years compared to the repayment plan they were on.
- Consolidate a high rate second mortgage or home equity line of credit: If you have a first mortgage AND a second mortgage or home equity line of credit on your home, the increase home values might now give us room to consolidate those loans into one, lower rate, first mortgage.
If you would like a review of your current mortgage situation, along with a complimentary analysis to see if refinancing will benefit you, contact your preferred Aspire Advisor!