Yahoo Finance Why 2024 Is the Right Time To Refinance Your Home
At the moment, the economic stability of 2024 is up for grabs. Some experts are predicting a slowdown that might even lead to recession, while others suggest that the Federal Reserve likely will cut interest rates now that inflation has begun to cool. What does that mean for homeowners?
Grant Cardone: These Will Be the Top Places To Buy Real Estate Over the Next Decade
Check Out: 3 Things You Must Do When Your Savings Reach $50,000
Experts suggest that 2024 will be an excellent time to refinance your home, whether to lock in a lower interest rate, take out extra cash using your home equity or to get out from under loan terms that just weren’t working well for you.
Here are seven reasons 2024 is the right time to refinance your home.
30-Year Fixed Mortgage Rates Are Likely to Drop
“With the Fed validating some of the market expectations and suggesting more cuts than expected going into the last Federal Open Market Committee (FOMC) meeting of 2023, financial markets have eased up on long-term rates,” according to Dr. Selma Hepp, chief economist at CoreLogic. “That suggests that 30-year fixed mortgage rate could end up below 6% by the end of 2024, absent any new surprises on the inflation front.”
Grant Cardone: Here’s the Best Way To Start Investing in Real Estate With $5,000
Your Credit Score Has Improved
In addition to the rates set by the Federal Reserve, mortgage rates are affected by your credit card score, lender’s policies and your financial status, according to Andy Kolodgie, the co-founder and owner of Sell My House Fast. Therefore, he said, even if the Fed doesn’t lower rates this year, “it’s possible that your situation will still make refinancing advantageous. … If your credit score improved within the period of time, then it is likely [possible] for you to get lower interest rates.”
Equity Can Equal Cash
Another great time to refinance is when you have enough equity to do a cash-out refinance, Kolodgie said.
“This enables you to refinance for a sum greater than your current mortgage and get the cash difference, which you can use for debt consolidation, home upgrades or other financial objectives.”
Lower Mortgage Payments Frees up Cash
Additionally, “A lower monthly payment could also free up cash flow to build savings, invest for retirement or pursue other personal goals,” said Richard Mews, CEO of Sell With Richard.
If you’re able to lower your interest rate as well, you end up saving much more over the full term of the loan because interest makes up such a big part of your total payment cost, according to Ryan Nelson, a licensed real estate agent and CEO of Rental Real Estate.
“This puts more money back in your pocket in the long run. It’s also a good way to reduce your monthly bills if your household budget is tight.”
However, it’s important to check whether closing fees charged for refinancing might offset those savings within a couple of years, Nelson said.
“Those fees can add up,” he said. “You’d also want to plan to stay in the home long enough to benefit from the refinance. So doing the math is key before deciding.”
You Can Get a Better Mortgage
Refinancing often allows you the flexibility to adjust the type of mortgage to best suit your needs, Mews said.
“For example, you could switch from an adjustable rate to a fixed-rate loan to lock in low rates and ensure consistent payments,” he said. “Or you could change the term from 30 years down to 15 or 20 years, which comes with the benefit of paying the loan off faster over time.”
You May Save on Private Mortgage Insurance
Refinancing also gives you the chance to remove private mortgage insurance (PMI) if you’ve built enough equity to hit that important 80% loan-to-value threshold, Mews said.
“By shedding PMI, you can save a significant amount each month. Just be sure to work with your lender and carefully weigh costs versus savings as part of making the refinancing decision.”
It May Provide Peace of Mind
Even if rates do not fall broadly in 2024, that does not rule out refinancing being a smart move, Mews said, because experts predict an economic downturn could be coming in 2024.
“For some borrowers, simply locking in rates before broader economic volatility can provide peace of mind and stability,” he said. “So evaluating refinancing options is wise even in stable or rising rate environments.”
Nelson’s advice is to crunch the numbers and see whether you can trim at least 0.75% off your rate as a general guideline.
“Anything less may not be worth the fees,” he said. “But every situation is different, depending on someone’s goals and finances. The best thing is to talk it over with a loan officer you trust.”
While 2024 may be a great year to refinance, be sure to check with your financial advisor and assess your finances before you make any major changes.
More From GOBankingRates
4 Reasons You Should Be Getting Your Paycheck Early, According to An Expert
10 Ways to Turn Your Six-Figure Salary Into Generational Wealth
This article originally appeared on GOBankingRates.com: Why 2024 Is the Right Time To Refinance Your Home
