June 18, 2019 / 7:49 PM / 3 months ago

YOUR MONEY-Buying or refinancing? The mortgage rate frenzy is back

    By Beth Pinsker
    NEW YORK, June 18 (Reuters) - Mortgage rates are nearing
historic lows again in the United States, making it an ideal
time to buy a home - or refinance.
    "It’s amazing how many times a once-in-a-lifetime
opportunity comes around," said Keith Gumbinger, vice president
of hsh.com, a mortgage information website. 
    This is the opposite of the steadily upward movement of
rates that  experts forecast for 2019. 
    Average rates are around 3.82% nationally for 30-year-fixed
mortgages, after peaking near 5% in November. The dynamic could
shift again on June 19, when the Federal Reserve announces its
latest decision on short-term interest rates. 
    Although mortgage rates are tied to the U.S. benchmark
10-year Treasury note            , they are sensitive to global
economic trends. 
    The people who need to pay the most attention are homeowners
who are eligible for refinancing. Some 6.8 million borrowers
currently could benefit from a refinance, according to analysis
by Black Knight, a mortgage data analytics company. Borrowers on
average would save $268 a month. 
    A significant share are new homeowners, who bought in the
last 12 months, when rates were 4.5% or higher. 
    "It’s fairly unprecedented to have a homebuyer refinance
within six months," said Ralph McLaughlin, deputy chief
economist for CoreLogic, a real estate data company. 
    Banks usually frown upon it, but motivated homeowners can
make it happen. One such individual is Zachary Pardes, a
32-year-old advertising director who bought a house last year
with his wife in Fairfield, Connecticut. While they tried to
purchase a house with a 3.5% rate like many of their friends and
family, they missed out and ended up with 4.5%. 
    Now Pardes is keeping a close eye on rates. If they drop a
full percentage point - which is generally the rule of thumb for
a refinance to make sense - he will jump. 
    "That translates to thousands of dollars saved each year,
and I already live in one of the most taxed states in the
country, so everything helps," Pardes said. 
    Many people already are taking the refinancing leap. At
Nations Lending, an independent mortgage broker based in
Cleveland, refinancings started to spike in April, with a 32%
increase in applications over last year, according to Chief
Executive Jeremy Sopko. May's increase was 41%. The biggest
activity was in South Carolina, Texas, Tennessee, California and
    The number of millennial buyers doing cash-out refinances
also spiked, Sopko said. In a cash-out refinancing, homeowners
remove a portion of equity from their home while adjusting their
loan rate. 
    The key to deciding whether a cash-out refinance is
worthwhile is to consider the cost of the debt versus where the
money will go. 
    Paying off high-interest debt or student loans, buying
investment properties or paying college tuition for a child
might make sense, but using the funds for a vacation or big
television would not. 
    "It’s important that you make that money work for you,"
McLaughlin said. 
    Otherwise, a home equity line of credit or another type of
loan might be more appropriate for your needs. 
    A typical Nations Lending client who bought their first
place two years ago for $200,000 could save $169 a month with a
1% rate drop, from 5% to 4%, especially if they could ditch the
extra payment of private mortgage insurance in the process,
Sopko said. If homeowners cash out an additional $20,000 to pay
off credit card debt, they could end up saving $523. 
    "They're not getting raises like that on a monthly basis, so
that's a significant savings," Sopko said. 

 (Editing by Lauren Young)
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