When the Federal Reserve cut interest rates by 50 basis points on September 18, many Americans turned their attention to mortgages and the effect the move could have on their housing finances.
And bestselling personal finance author and radio host Dave Ramsey now has a top tip for people looking to get the most out of their home-buying investments.
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In early October, rates on 30-year fixed-rate loans nationwide averaged in the 6% range. Some sources even reported some bids as low as 5.7%.
Then, a report published by the Mortgage Bankers Association of America began to show encouraging evidence of consumer interest in home purchasing.
And experts predict the housing market will continue to accelerate if the Federal Reserve cuts interest rates when it meets again in early November, a move many expect.
As lower mortgage rates inspire more activity in home sales, momentum also appears to be picking up regarding another real estate maneuver: refinancing.
Ramsey has now expressed his opinion on whether (and if so, when) homeowners should take advantage of declining mortgage rates as an opportunity to refinance their loans.
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Ramsey explains the right time to refinance your mortgage
Refinancing a mortgage is the process of replacing your existing mortgage with a new mortgage, which should offer a lower interest rate.
If you can get a lower rate, Ramsey suggests moving forward with a mortgage refinance, as long as you plan to live in your home long enough to build significant savings.
If that's the case, Ramsey offers six steps you might consider on your path to a successful refinancing move.
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The first step is to take a close look at the numbers and make sure a refinance makes financial sense. Find out how much you'll save each year and exactly how much you'll pay the lender to complete the deal. If this results in a considerable amount of savings, the decision to refinance is most likely the right one.
The second step, ramsey saysIt involves shopping around to find the best interest rate available.
But the third step is equally important. This involves making a final decision on choosing your lender. In addition to finding the lowest rate, also consider how much you will be charged for closing costs. Understanding both factors and comparing the results will reveal the best deal.
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Ramsey Clarifies Final Steps for a Successful Mortgage Refinance
Next, as a fourth step, when you're sure you've found the right refinance plan for you, be sure to lock in the rate you decided on right away.
Guaranteeing your rate may cost a little money, but it's worth it because you'd hate to see your rate increase after you think you've found the one you want.
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Going through the subscription process is the fifth step. This simply means proving to your lender that you have the means to secure your loan. The lender will take the opportunity to search your financial history, bank accounts, and pay stubs to verify your financial credibility.
And the last step is to close the new mortgage. This process involves signing all documents and paying closing costs. It usually takes one or two months.
Paying a lower interest rate on your mortgage this way can be a smart financial move.
“This is the most common reason people refinance their mortgage, and it's often a great idea.” ramsey wrote.
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