When does it make sense to refinance my mortgage? We have all heard the news stories about historically low mortgage interest rates. They made me curious to learn more about who may benefit from them. I reached out to Tom Seaman from Wintrust Mortgage for some answers. Here is what he shared with me.

Refinancing your existing mortgage has the potential of reducing your interest rate, the term of the loan, or eliminating private mortgage insurance (PMI). This can translate into lower monthly payments and interest savings over the period of ownership of the home.

An example would be, refinancing a home purchased last year with less than 20% down. Market appreciation has driven values up, and some borrowers are finding they are able to shave maybe a 1/2% off of their rate and eliminate (PMI). That can lower their monthly payment quite a bit.

Another scenario would be restructuring your loan from a FHA or adjustable rate mortgage (ARM) to a fixed rate loan.

Wisconsin has low mortgage closing costs compared to other states. Typical closing costs on a mortgage would include an appraisal fee, title insurance, and costs to process the application like running a credit report. You can expect mortgage closing costs to be $2,000-$2,100.

Something to keep in mind when working with a mortgage advisor. Lenders have the ability to adjust the interest rate and "lender pay" closing costs for you. Every situation is different and they can run multiple scenarios to find the best fit for your individual needs. You may also be eligible for a property inspection waiver (PIW). Depending on the program and your loan to value ratio, you may be able to save money by not having to pay for an appraisal.

Any expectations as we go into 2021?

To keep the mortgage market stabilized and keep the rates low, the federal government is pouring 100s of  millions of dollars into mortgage backed securities (MBS) every month. Mortgages rates reflect the economic reports like unemployment, housing starts, and the consumer price index (CPI).

We expect mortgage rates will remain steady in the near term perhaps going up slightly to the high 2% to low 3%. However, next year expect them to stay at/near the 2%’s.

The moral of the story is--if your interest rate does not start with a 2.%, it may benefit you to have a conversation with a mortgage advisor.

If you would like to know if it makes sense to refinance your mortgage, you can reach out to Tom Seaman at (920) 540-3582 for a complimentary mortgage review!