If you’re thinking of relocating or downsizing, our low rates can help.
Fed leaves interest rates unchanged as Iran war and oil prices put pressure on economy
The Federal Reserve kept its key interest rates on hold on March 18 as policymakers considered the uncertain long-term economic impact of the Iran war.
If you’re a prospective homebuyer, someone looking to refinance their mortgage, or just curious about interest rates, you may have noticed a few months ago that mortgage rates dropped below 6% for the first time in years. Specifically, in February, the average interest rate on the most common mortgage, the 30-year fixed rate loan, fell to 5.98%. After September 2022, interest rates have not been that low.
freddie mac (OTC:FMCC)The government-backed group that supports the U.S. housing market reported that the rate was 6.23% as of April 23. It also noted that “interest rates are currently at their lowest levels in the last three spring home buying seasons.”
These relatively low interest rates provide an opportunity to help some retirees or those nearing retirement.
Retirees and low interest rates
If you’re thinking about moving or downsizing your home after retirement, low interest rates can be very helpful. If you’re moving or downsizing, you’ll probably sell your home and buy another, and the lower the interest rate on your new mortgage, the better.
However, keep in mind that if you are moving or downsizing, you may be able to avoid a new mortgage altogether if the difference between the value of your old home and the value of your new home is large enough. For example, if you sell your $700,000 home and end up with $500,000 net after paying off the remainder of your mortgage, you could simply use that to buy a new $500,000 home. You may be able to avoid the interest rate problem altogether.
You can also benefit from relatively low interest rates if you plan to continue living in your current home until you retire. If you still have a mortgage, it might be worth refinancing now. However, do so with caution. For example, if you sign on for a new 30-year loan when you still have eight years left on your loan, refinancing isn’t necessarily the best idea. It’s generally less stressful to enter retirement without a mortgage if possible.
As a rule of thumb, if the new interest rate is at least 1 percentage point lower than the old rate, it may be worth refinancing. So if your current loan rate is 7.5% and you can get a new loan at 6.25%, that’s a good bet. Note that you don’t have to take out a 30-year loan. Consider a 15-year loan instead, and know that you may also be able to get a 10-year loan from a good mortgage lender. (Short-term loans tend to have slightly higher interest rates, but you pay less interest overall.)
on the other hand…
You may not want to take any action right now. interest rate It was done It may fall further, but it is also possible that it may rise. Learn that there are other ways to increase your retirement income other than selling your home. Still, if you’re risk-averse, don’t like uncertainty, and today’s lower interest rates can help you save money, it might be a smart move to jump at the opportunity.
Serena Maranjian has no position in any stocks mentioned. The Motley Fool has no position in any stocks mentioned. The Motley Fool has a disclosure policy.
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