When Should You Consider Refinancing Your Mortgage?

Refinancing can be an enormous cost saver for homeowners – and now is an ideal time to explore this option.

Last year, when it became evident that the economy was starting to weaken, the Federal Reserve began cutting its federal funds effective rate by approximately 0.25-0.25%; following massive economic threats caused by coronavirus pandemic outbreak, they further cut this rate all the way down to 0.05% – this rate corresponds with what banks charge their prime customers (aka “the prime rate”) with an additional amount (usually 3%) added on top. Prime rate correlates with mortgage interest rates.

Banks have responded by cutting mortgage rates all the way down to all-time historical lows – around 2.75% for 15-year mortgages and 3.33% for 30-year mortgages, respectively. Refinance rates are comparable with home purchase mortgage rates – meaning refinancing now could save significant interest payments on home purchases.