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WHERE ARE RATES HEADED?
Many in the housing and lending industry are anxiously awaiting the next move by the Federal Reserve at their upcoming meeting on September 17th. The Fed has kept rates unchanged since December, 2024 when they last provided a slight 25 bps rate cut after growing political and social pressure. Despite several meetings this year and anticipated cuts earlier this year, the Fed has not cut the Fed funds rate thus far in 2025.
However, Fed Chair Jerome Powell recently signaled that they could be ready to provide a small rate cut at the next meeting if incoming economic data will confirm easing price pressures without jeopardizing growth. The Federal Reserve is cautiously optimistic about reducing the Fed Funds rate as they expect inflation numbers to rise slightly to 2.9%, moving away from the current 2.8% number and further away from their target 2% number. However, despite the anticipated rise in inflation, Fed Chair Powell still indicated that a small rate cut would be warranted. Many believe a 25 bps cut is imminent at their next meeting and the markets have already responded accordingly.
WHEN IS THE RIGHT TIME TO REFI?
If you have purchased or refinanced within the last two years or so, chances are that you may now have an opportunity to refinance where it makes economic sense. But, when is the right time?
The answer is: it depends. It depends on a variety of factors but the biggest one of all is – how long do you plan on staying in this house? For example, on a $1,000,000 mortgage at 7%, your monthly principal and interest payment is $6,653. At 6%, the monthly payment is $5,996 a monthly savings of $657. However, if you plan on moving in the next 6 months, this refinance probably doesn't make sense since you will have standard costs to refinance. But if you are staying in your home for at least a year, you could be saving thousands of dollars in interest if you refinanced your mortgage.
In addition to the drop in rates, other reasons to refinance are:
- Your Credit Has Improved: A higher credit score can qualify you for better terms and lower rates, making a refinance more worthwhile.
- You Want to Shorten Your Term: Moving from a 30-year loan to a 15-year can help you build equity faster and reduce total interest costs.
- You Need to Access Equity: A cash-out refinance can tap into your home's equity to fund renovations, pay down debt, or cover major expenses.
- You Want to Switch Loan Types: Refinancing from an adjustable-rate mortgage (ARM) to a fixed-rate loan can provide long-term stability.
Contact me for a personalized analysis to see what is the best course of action for you.
TIPS CORNER
Here's a simple trick to cut down on the total interest you pay on your mortgage: Split your monthly mortgage payment into two smaller payments each month. By paying every two weeks., less interest accrues thanks to the power of compounding.
Example: On a $500,000 loan at 6% for 30 years, switching to biweekly payments could shorten the loan by about 4 years and save roughly $70,000 in interest.
It's a small change with a big payoff!
