The Brexit events that occurred at the end of June created a lot of volatility in the markets. While many are speculating on the future events and long-term effects of the split, it’s important to step back and focus on what the current situation is and the short-term opportunities that are being presented.
After an initial two day decline, the stock market has nearly recovered all of its losses. While the market may have recovered much of its losses following the Brexit vote, US Treasury bond prices have risen and thus interest rates have declined, as global investors seek safety in the US.
As a result, current mortgage rates are again near historic lows and may present a great opportunity for homeowners to refinance their mortgages to lower rates. As we write this, some lenders in the Sacramento area are offering 30-year and 15-year rates in the ranges of 3.5% and 2.875%.
For example, if you obtained a mortgage of $300,000 @ 4.5% for 30 years, your monthly payment of principal and interest would be $1,520/month. In comparison, a $300,000 loan @ 3.5% for 30 years would require a monthly payment of $1,347, a savings of $173 per month. This would reduce your interest cost from a total of $247,200 to $184,920, for total savings of $62,280! In addition, if you continue making the same payment as your current mortgage, the term of your mortgage will be reduced as will the total interest paid.
There are many other factors to consider when deciding if a refinance is suitable for you, such as current cash flow, other savings goals, length of stay in the home, and loan-to-value ratio, so please don’t hesitate to contact us with any questions.