The coronavirus situation is capturing headlines all across the globe and, its effects are being felt in many sectors. One such notable field is mortgage rates while buying a home. Consumers from all across the world are keeping a close eye on the rise of the coronavirus crisis as the affected numbers continue to rise every week. Similar to the rest of the financial world, the mortgage market is also affected by the coronavirus outbreak. We can see mortgage rates and bond yields both seeing a drop in the last few days due to the coronavirus outbreak with the mortgage rates hitting a low point in more than 3 years.
Buying a Home and Mortgage Rates
You may be thinking about buying a home or you love the existing house but you will love a lower monthly installment. In any event, the fluctuating interest rates can make a big difference to your planning. If you can time your refinance or purchase properly you will be able to save significantly. However, the sellers will also be looking at the large difference in the interest rates when they are planning to sell the property. Let’s check out how the ongoing drop in interest rates will affect you while buying a home.
If you are in the process of buying a home at the moment it will be tempting to stop the search in the wake of falling mortgage rates due to the coronavirus crisis. Although history tells us that these rates will keep on dropping there is no guarantee about it as the future of the market is unpredictable. The mortgage rates are at a low already so you are better advised about locking them now even if they happen to drop a bit further after you have bought the home. You will not be the only home buyer who will benefit from the falling interest rates. When these rates fall consumers start contemplating buying a home and this drives up the demand. It will result in a price rise again.
You do not need to be ready for buying a home due to the falling interest rates. As a matter of fact, by the end of January, more than 9 million Americans stood to gain significantly due to mortgage refinance. This was the time when the mortgage rate stood at 3.49%. Now it has dropped further and is likely to drop further. However, it might be a good idea to check out whether refinancing is the right option for you. Dropping interest rates may not necessarily be the reason to opt for refinancing. You need to consider the current interest rates and compare them with what is on offer and weigh in these three significant factors.
- The cost of refinancing: You may typically expect to pay in the region of 2% to 5% of the mortgage loan amount in the closing costs. So, for a $200,000 loan you will be required to pay an amount between $4,000 and $10,000.
- Length of stay in the present home: If you are planning to sell the home in the next few years, the closing costs involved will not be worth it. However, if you stay in the house for a decade or so you will easily recoup the expenses.
- The difference in interest rates: The industry experts are not unanimous about how many drops in the interest rates are significant enough but generally speaking if there is a drop of more than 1% it is worth considering the option of refinancing.
As you are keeping an eye on the news and trying to stay safe, ensure that you are checking up on your finances. It might be a good idea to change the mortgage in 2020 keeping in mind the falling interest rates. However, you may want to consider the option of building a semi-custom home instead. A good option for a builder in Florida is Vitale Homes.
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