After the Federal Reserve raised0.75 percentage point, concerns over how the action could of millions of Americans soon surfaced.
"Reducing inflation will likely require a sustained period of below-trend growth and it will very likely require a softening of labor conditions," Federal Reserve Chair Jerome Powell said in a Sept. 21 news conference.
"We will keep at it until we are confident the job is done," Powell added.
This is not great news for homebuyers, especially after the average interest rate for a 30-year mortgage hit 6% earlier in September — the highest it's been since 2008. Mortgage refinance rates are also up, hovering around 5.5 compared to 2.15% a year ago.
While an increase in rates may help tame inflation, they don't always help consumers.
That doesn't mean, however, that some homeowners may not still benefit from mortgage refinancing. In fact, even with the rate jump, select homeowners can still save money with a refinance.
If you think you could benefit from refinancing, or simply want more information on the potential benefits, speak with a mortgage specialist today.
Here are three types of homeowners who may still benefit from refinancing their mortgage.
Homeowners with high interest rates
Mortgage rates, particularly during the pandemic, hovered near record lows. But, if you have a higher interest rate (think 6% or above) you may benefit from refinancing your mortgage in today's rate environment.is often tied to your individual circumstances and preferences.
Stay on top of Freddie Mac's weekly rates to compare them against your own. If you can get a rate that's a full point less than what you currently have, most professionals would advise you to take it. Even a half-point drop may be worth it, particularly if your initial home loan was a large one.
Review the numbers and do the math. You may still be able to save money.
Homeowners who want to pay off their loan early
The 30-year home loan is the most popular, largely because it spreads out payments to a more manageable extent. But it takes decades to pay off the loan (assuming you make conventional payments and don't pay bi-weekly).
But what happens if you want to? If you inherit a large sum of money or simply just want to eliminate what's likely your biggest monthly bill, a mortgage refinance loan may be worth pursuing. By shortening the loan term you'll be able to pay it off and build up equity in the house faster.
Be careful, however. Reducing your loan term may make your monthly payments go up, albeit for a shorter period.
Speak with a mortgage refinance expert who can help guide you.
Homeowners who want to drop their PMI
If you initially purchased your home with a down payment of less than 20% of the home's value the lender probably tacked onto your monthly bill. You may be able to refinance your mortgage loan to remove this payment if your home value has grown since the time of purchase.
If you own a home in a part of the country, then you may be unnecessarily paying the PMI. Refinancing could help eliminate it. Just make sure the numbers make sense (for example, you don't want to refinance to eliminate an $80 PMI and have your monthly payment go up $160 overall).
State of mortgage refinancing
The current state of mortgage rates and mortgage refinance rates are clearly not as advantageous as they were in 2020 and parts of 2021. But, if inflation doesn't cool, the current rate environment may be the best homebuyers and homeowners can expect for the foreseeable future. So don't dismiss the potential benefits of refinancing, even now.
Not sure if it's the right time for you? Consider working with an online financial adviser who can help you.