In recent weeks, Wall Street has talked a lot about the fears of a coming recession, fueled by a drop in government bond yields. The casual investor may have no idea what this means for them, but for homeowners in the military and beyond, it means now is the perfect time to refinance a mortgage.
What any potential refinancer needs to know is that the falling bond yield is pushing mortgage rates to their lowest levels in three years. In November 2018, the interest rate was steady at five percent. Eight months later, the interest rate in now at 3.6 percent and looking to fall further.
This isn't some shady internet ad, promising easy money on Obama-era mortgage laws or new Trump-era government home loans – those certainly exist and everyone should be wary about trusting easy money. But the drop in mortgage rates comes directly from Freddie Mac, whose rate on a 30-year, fixed-rate mortgage fell to 3.6 in August 2019. The reason is that the 30-year rate is linked to 10-year Treasury Bonds. The rate of return on those bonds just fell to their lowest since October 2016.
(St. Louis Federal Reserve)
What this means is that suddenly your homeowner dollar goes a little bit further, considering the cost of taking out a new loan or refinancing an old one just dropped. According to Caliber Home Loans, a lending company who specializes in military and veteran homebuyers, the rule of thumb used to be that the interest rate for a new mortgage must be about two percentage points below the rate of a current mortgage for refinancing to make sense.
With new low- and no-cost refinancing from Caliber and other lenders, refinancing could make sense any time – especially right now, given the latest interest rates. A refinance could reduce overall interest while reducing a monthly payment. If you acted right now, you wouldn't be alone, not by far. Falling rates boost the U.S. housing market.
It's important to think of your home as an investment, too.
"My applications are up across the board," said Angela Martin, a Nashville, Tenn.-based loan officer told the Wall Street Journal. "Every time the Fed starts talking is when my phone starts ringing off the hook."
What Martin means is the Federal Reserve just cut the benchmark interest rate after a few successive rate hikes. This is when people start looking for a better deal. But be wary – lenders will sometimes employ different perks after a rate drop to entice customers to accept things like credits at closing instead of a lower rate.
For military families and veteran homeowners, look into military-oriented lenders like Caliber Home Loans. Caliber and companies like it specialize in the needs and benefits afforded to military members and veterans. Caliber is also a proud sponsor of the 2019 Military Influencer Conference, a three-day conference of service members, veterans, and spouses who work to elevate the military veteran community.