Provided courtesy of: http://www.mortgagenewsdaily.com/consumer_rates/
Mortgage rates continued lower to start the week as Wuhan Virus continues to be diagnosed at an exponential rate. As we discussed last week, interest rates in general should continue to take cues from the spread of the virus. Why are rates being driven by something that doesn't seem to be at all related to rates? Simply put, the global financial market is accounting for the impact that a potential epidemic disease could have on the global economy. A weaker economy generally promotes lower stock prices and lower bond yields (aka rates).
This raises risks and opportunities for prospective mortgage borrowers. If the virus situation continues to get worse before it gets better, rates could certainly go even lower.
Mortgage rates moved meaningfully lower over the past 2 days as panic over the coronavirus outbreak continues affecting financial markets. If this epidemic ends up being similar to SARS in 2003, it ultimately won't be worth as much of a drop in interest rates as we've seen so far. But the thing about brand new strains of deadly viruses is that neither the market nor the medical community knows exactly how this will unfold. Until that picture becomes clearer, the market is preparing for more dire outcomes.
For whatever it's worth, the timeline of the SARS outbreak spanned 2 calendar years (2002 - 2004) but the most notable market impact was confined to the space of a single month (March 2003).
Mortgage rates remained in line with 3-month lows today for the average lender. Several lenders offered marginally better terms compared to yesterday, but in those cases, the only changes were to the upfront costs associated with the same rates quoted yesterday.
It's a pleasant surprise to see rates as low as they are considering several economic reports have been quite strong recently. In general, stronger economic data tends to put upward pressure on rates. That was a risk today with today's Existing Home Sales report coming in at the best levels since early 2018. But econ data isn't the only consideration for the bond market that underlies day-to-day rate movement.
A refinance occurs when a business or person revises a payment schedule for repaying debt. Mechanically, the old loan is paid off and replaced with a new loan offering different terms. When a company refinances, it typically extends the maturity date. Companies or individuals refinancing loans may have to pay a penalty or fee.
BREAKING DOWN 'Refinance'
The most common forms of consumer debt are mortgages, car loans and student loans. The borrower agrees to make certain payments based on a rate of interest. Companies operate the same way. The most common types of corporate loans are term loans, bonds and lines of credit. The company agrees to the terms of each loan type, and the bank lends it money. Terms provide the details of the loan and specify the interest rate, payment amount and payment date(s).
When the terms of the loan are revised in a way that changes the payments associated with the loan, the loan has been refinanced. In a refinanced loan, the old loan is paid off with the new loan, and the old terms are replaced with new terms. Some loan terms come with fees associated with prepaying, which makes refinancing less rewarding. The most common changes in loan terms are maturity date and interest rate.
Borrowers refinance for a myriad of reasons. A common goal is to pay less interest over the life of the loan. Borrowers may also want to change the duration of the loan or switch from a fixed-rate to an adjustable-rate mortgage, or vice versa. The reasons and motivations behind refinancing a loan are as varied as the loan types offered.
Refinance Loan Types
There are several different types of refinancing options. The type of loan a borrower decides on is dependent on the needs of the borrower. The most common type of refinancing is called the rate-and-term. This occurs when the original loan is paid and replaced with a new loan. Another type of refinancing is the cash-out. Cash-outs are common when the underlying asset collateralizing the loan increases in value. The transaction involves withdrawing the value or equity in the asset in exchange for a higher amount. In other words, when an asset increases in value on paper, you can gain access to that value with a loan rather than selling it. This option increases the total loan amount but gives the borrower access to cash immediately while still maintaining ownership of the asset. Another refinancing option is referred to as the cash-in. The cash-in refinance allows the borrower to pay down the loan for a lower loan-to-value ratio or smaller loan payments.
Like many other Americans, you may be considering using the equity you've built in your home to re-invest in your dreams or consolidate debt. A mortgage refinance allows you to borrow additional money on your mortgage, so you can afford the things you've always wanted. It will also help save you money and help consolidate your debt into one convenient payment.
Mortgage refinance can prove beneficial in several ways:
We help you decide whether it is the right time for you to refinance. The decision to refinance should be carefully evaluated to avoid any complications at a later stage. By carefully studying the status of your current mortgage and comparing it to your income and other debts, we help you pick the refinance solution that best suits your current financial status.
We offer some of the lowest and most competitive mortgage refinance rates in the market. Regardless of your requirement, whether it is to consolidate existing mortgages or obtain a better rate, we get you the best deal possible. Our experienced mortgage professionals, who have extensive knowledge of the mortgage industry, will provide the necessary guidance that you need in making the right refinance decision.