Aside from credit card debt and car payments, there’s rarely a debt known to more adults than a mortgage. Staying on top of a mortgage takes careful management and planning just like any other form of debt and those who struggle to keep their accounts in line know the pain of dealing with their payments.
First-time mortgage, long-term commitment
For those looking to enter the market with their first home purchase, now may not be the best time. Rates have risen for the first time in 2019 and continue to trend upwards, though experts expect rates to stabilize and drop following this high point. It’s not just an isolated incident given how home buyers have reacted through the past few months alone.
As rates rise and fall, those who keep a keen eye on the market are likely to react more quickly than the general populace. Yet recent home sales have reached their lowest point since 2013 in a showing of just how sensitive the average house hunter has become in regards to shifting mortgage rates. On the whole, a dip of three percent in mortgage applications isn’t a massive shift, but enough that financial officials take notice.
This shift does open up new avenues for those who rent homes or those looking to enter into real estate. As buy rates fall, rental agreements become more lucrative and a working knowledge of buy-to-let mortgages becomes increasingly helpful. Weighing the pros and cons of a mortgage for a personal home versus a rental property is a very different type of conversation once revenue enters the picture.
Regardless of the type of mortgage in question there is an element of awareness required in staying current. Rate fluctuations happen with relative frequency and jumping into a new home simply because rates are slightly lower now than they were three weeks ago can be a serious financial misstep. Existing mortgages and the art of refinancing takes time and effort on top of knowing whether or not a refinanced mortgage will save you money through the length of time you plan to stay in your home.
Refinancing fees will eat your savings
Spotting a lower rate is tempting, but it is far better to run a few numbers and weigh your options before making any sort of serious financial call. There are fees and caveats to refinancing that could be the difference between losing several thousand dollars or saving tens of thousands depending on how long you plan to own your home in question. If rates are dropping, should you wait to see if the drops continue? If rates might rise soon, is it too late to get a better rate before the downturn takes rates even lower?
If you plan to sell your home within the next few years there’s almost no upside to a serious refinancing. Small changes in rates might shave a few tens of dollars off of your payments per month, but even a relatively modest refinancing cost of a few thousand dollars means you’ll be paying off the refinancing fee for years before you even start saving money from the refinancing in the first place. On the other hand, staying in that same home could save tens of thousands of dollars in the long run. Knowing your plans tends to be almost as important as knowing the market itself.
While refinancing a mortgage isn’t something a homeowner tends to jump into blindly, taking your time to check rate trends and evaluate your life plans can go a long way in saving you money throughout your life. No one wants to spend tens of thousands of dollars they could have spent on their hobbies or loved ones and neither should you.