The 2016 presidential election is just 6 days away. This is not a political post; however, I do urge each of you to exercise your privilege (yes, it is a privilege) to vote. Regardless of who wins the election, there will be a new president in the White House. With some uncertainty regarding the outcome, it may seem like the worst time to consider buying a new home or refinancing your mortgage, but we believe it is a great time for several reasons.
Today, fixed-rate mortgages are at an historic low of 3.47 percent. On Wednesday, November 1, 2016 after a two-day meeting in Washington, the Federal Reserve voted to keep interest rates unchanged this month, but “hinted” that it would be ready to raise interest rates sometime in December. This rise in rates is based on improving growth in the economy and the job market.

When you finance your home at a lower rate, it translates into more home for your money or a lower monthly payment. Current trends indicate that Americans spend approximately one third of their income on mortgage payments, so reducing this bill is important for the family budget. A 30-year mortgage of $500,000 financed at a fixed rate of 3.5 percent equals a monthly payment of $2,245. At an interest rate of 4.5 percent (which is a rough prediction for 2017), monthly payments go up to $ $2,533. Financing at the lower interest rate could save a homeowner $3,456 per year.

freddiemacinterestratesRefinancing at a lower fixed rate protects homeowners from inflation. Per a recent Kiplinger forecast, we will end 2016 with an inflation rate of 1.8%. The predicted rate for 2017 is 2.4%. It may not seem like a big jump, but it just might be enough for the Fed to raise interest rates even higher. Borrowing at a lower interest rate allows homeowners to leverage what is for most of us, our greatest asset. This is because you are borrowing money at today’s dollar valuation. When inflation occurs, your monthly mortgage payment won’t change, because it is based on the value of the dollar at the time of loan origination. You are capitalizing on a dollar that has been slightly devalued by inflation. One of my clients recently paid off a 30-year mortgage, and the final payment was about $1200. That may not seem like a lot for a final mortgage payment, but 30 years ago $1200 per month was a lot of money. By locking in a low interest rate, they were able to beat inflation.

Is your head spinning? Mine is! But just remember, locking in at a low interest rate means more money in your pocket each month, and that’s a good thing for all of us. If you need help with a mortgage or refinance and aren’t sure where to begin, please check out the resources (LINK) page on our website for a list of trusted lenders, or call us for more information.