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Jan. 26, 2021, 2:31 p.m. EST

Mortgage Rates Keep Sinking — Why It Might Be a Good Time to Refinance Your Home Now

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By Credible

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In the past few months, mortgage interest rates have continued to drop, driven by the coronavirus pandemic and reduced Fed interest rates. As of January 21, 2021, 30-year fixed-rate refinance rates dropped to 2.625%, while rates for 15-year fixed-rate refinance loans fell to 1.875%, a new 107-day low.

For homeowners looking to save money, refinancing your mortgage now and taking advantage of these historically low rates before they rise again can be a strategy to lower your housing costs.

With mortgage refinance rates reaching historic lows, refinancing your home loan might save you a substantial amount of money.

Say you took out a home loan for $300,000 in 2018 with a 30-year term and a fixed interest rate of 4.94%. If you refinanced now and qualified for a 30-year fixed-rate loan at 2.90% interest, your monthly payment would decrease from $1,599 per month to just $1,211 per month — a savings of $389.

Plus, you would save $46,266 in interest charges over the life of this new loan, even after factoring in closing costs.

Refinancing is best if:

Refinancing may not be the right option if:

Keep in mind that some mortgage lenders are becoming more stringent with their underwriting processes. If you have recently experienced income decreases due to the COVID-19 pandemic or have a lower credit score than before, you may not qualify for the loan you’re seeking.

If you’ve decided that refinancing your mortgage is right for you, visit Credible to compare personalized rates from multiple lenders all in one place .

Learn More: How to Refinance Your Mortgage in 6 Easy Steps

If you’re like many people, you’re probably worried about refinancing now in case rates drop again. However, holding out for another significant rate drop could be a costly mistake. Rates can start increasing at any time, and mortgage refinancing is about to get more expensive.

As of Dec. 1, 2020, Fannie Mae and Freddie Mac (the two agencies that buy most of the mortgages in the U.S) will start charging a new adverse market refinance fee of 50 basis points (0.500%). The fee is meant to help with many of the expenses Fannie Mae and Freddie Mac sustained because of Covid-19’s economic impact. Refinance loans that are over $125,000 are subject to this new fee, while refinance loans equal to or less than $125,000 are exempt.

In response to the new fee, some lenders have increased their rates to offset the additional cost, passing on the added expense to borrowers.

You can explore your mortgage refinance options in minutes by visiting Credible to compare rates and lenders. Check out Credible and get prequalified today.

If you’ve been putting off refinancing your home, don’t delay much longer. Mortgage refinance rates are at record lows, and you have a limited time before more lenders increase their rates as a result of the new adverse market fee.

Mortgage refinances can take up to two months to close — the average time to close is 51 days, according to the latest data from mortgage technology company Ellie Mae — so you need to act quickly to avoid higher rates.

You can compare actual refinance rates from multiple lenders at once using Credible’s robust marketplace. Click here to learn more about each loan type and how to secure a lower interest rate today.

Kat Tretina is a contributor to Credible who covers everything from student loans to personal loans to mortgages. Her work has appeared in publications like the Huffington Post, Money Magazine, Business Insider, and more.

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