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Refi opportunities revive as 30-year mortgage rate drops to 3.82%

Home loan interest rates fall to 21-month low after six weeks of sustained drops.

By Jeff Lazerson

6/6/19 

What I think: Last month, the Federal Reserve released a survey indicating that an astounding 25% of all working adults have no retirement savings. For most Americans fortunate enough to be homeowners, their biggest wealth-building opportunity (besides property appreciation) is the forced savings one enjoys when paying down and eventually paying the mortgage off.

Reducing the interest but making the exact same payment on the new, lower-rate mortgage will accelerate your principal reduction. Or, you can reduce the term and the interest rate of your mortgage from, say, a 30-year to a 15-year fixed for even a faster path to your mortgage burning party.

But, if, and when, rates make a U-turn and climb, there are always a lot of tears about missed opportunity.

Based upon the May 30 Freddie Mac 30-year fixed of 3.99% (which was way higher than this week’s rate), and assuming a .75% mortgage rate improvement, 222,000 fairly well-qualified borrowers in the Los Angeles-Orange County metropolitan statistical area could save an average of $449 per month by refinancing. The Riverside-San Bernardino-Ontario MSA offers 100,000 homeowners an average savings of $289 per month. And for a capper, 775,000 Californians could save an average of $390 per month.

If you are seeking cash-out or trying to get rid of your mortgage insurance because your property value has gone up, there is a more important reason to just do it now. Property values will head lower if the U.S. goes into protracted recession mode.

Pasadena homeowner and longtime Mortgage Grader client Debra Hunt plans on a home improvement project. Debra was delaying her cash-out refinance (mortgage interest clock starts ticking once the fixed rate loan funds) to coincide with the remodel plan approval from the city and learning from her contractor exactly how much this will cost. Days ago she had a change of heart and decided to lock her rate in to avoid the risk of a lower appraisal and less accessible equity.

“I noticed similar properties in my neighborhood staying on the market longer,” said Hunt.

Chapman University’s Professor and President Emeritus Dr. Jim Doti saw a housing recession on the horizon when Freddie Mac mortgage rates were edging toward 5% at the end of 2018. But not anymore as mortgage rates are under 4%.

“I see positive (housing) growth, sales volume and median price (locally) through the third and fourth quarter of 2019,” said Doti.

Plenty of folks have opinions about the direction of interest rates and home values. That crystal ball stuff doesn’t matter. Execute now if it means improving your mortgage situation.

Freddie Mac’s research indicates there can be a wide dispersion among mortgage rate offers. Its chief economist, Sam Khatar, urges you to shop around because you will save money.

Mortgage broker Jeff Lazerson can be reached at 949-334-2424 or jlazerson@mortgagegrader.com