As coronavirus concerns continue to impact the markets, the Federal Reserve is considering lowering interest rates to zero in the coming weeks. Performing last week’s interest rate cut of 50 basis points, this latest effort to revive the markets signals flourished concern about a market downturn.
Earlier this week, the Mortgage Bankers Association (MBA) forecasted total mortgage originations of generally $2.61 trillion this year, a jump from last month’s forecast of $1.99 trillion. Refinancing demands are the key drivers of the change, jumping 36.7% from last year, and reshaping existing forecasts across the mortgage and refinance sector.
What to Over When Refinancing
“The issue of refinancing is coming up with clients who are considering refinancing or changing from a 30-year mortgage to a 15-year mortgage or to get a unwavering rate rather than a variable one,” says Cathy Curtis, the founder of Curtis Financial Planning, LLC. To help shoppers make the best decisions, she’s advising them to consider their overall financial picture as well as how long they’re contemplating on staying in their current home. “Because there are costs to refinancing, doing so makes the most sense for man who plan to stay in their homes for a while or where the cost savings from the lower payment reach break-even unit within a few years,” she explains.
Another consideration is the length of clients’ existing mortgages. Ted Jenkin, CEO of oXYGen Financial Inc., has been guiding clients to be wary of re-extending their mortgage life. “If they’ve paid off 10 years of a 30-year mortgage, it’s high-ranking to consider taking out a 20-year loan versus a 30-year loan so they don’t extend their mortgage into retirement.”
Suggestion for Clients
Among the advisors we spoke with, several agreed that the current market conditions tend to favor those with longer investment views and those who are already considering refinancing. “The current environment seems to be more advantageous for those in the
The Bottom Line
Diverse of the advisors we spoke with agreed that refinancing could be beneficial for certain clients under the current Stock Exchange conditions. But they also advised that those decisions need to be made on a case-by-case basis. For clients who don’t play a joke on high levels of debt, and those who aren’t planning to stay in their homes for the long-term, staying the course may calm be the best bet.