BURLINGTON, Vt. (WCAX) Fears of a global pandemic, plunging stock market, and travel alerts have all been linked to the coronavirus, but a rush to refinance homes?
As concerns about the virus spread to the stock markets and they become more volatile, many people are moving their money into investments that seem more stable, like mortgage bonds. And that influx of investment cash is pushing interest rates down. That means if you’re paying a mortgage right now, you may want to look at whether you could be paying a whole lot less.
“I knew Monday walking in we were going to see interest rates drop more this week,” said Nick Parent with Vermont Mortgage Company. And he knew that meant he’d be busy, with dozens of clients calling him wanting to refinance their homes. “I don’t think we’ve seen rates this low since October 2013.”
Parent says people who bought homes and got mortgages in the last few years when the interest rates were higher are now switching to lower rates, paying tens of thousands of dollars less over the course of their mortgage. “Depending on the loan amount, that could save someone anywhere from $100 to $300. The one I closed today, it was actually $400 a month that they were saving because of the size of their loan amount, so it’s real money,” he said.
Real money that means real changes for families like Ernie Rossi’s, who decided to refinance. “It makes a big difference,” Rossi said.
They went from a 30-year mortgage with an interest rate in the fours, to a 20-year in the mid-threes. That translates to $300 a month in savings that he and his wife can put towards their child care for their one and-a-half year-old, or remodels on their home on Lake Iroquois in Williston.
“We all like to save money, so we were super excited,” Rossi said.
But what makes sense for his family may not make sense for some. Parent says if homeowmers are planning on moving soon, they probably want to stick with what they’ve got and not spend up to $3,000 on refinancing. “The break even on a refinance is usually about a year or two years, and if you’re not thinking you’re going to have the home then, why spend the money to refinance? Because it does cost money,” he said.
The lower mortgage interest rates are also good for home buyers too. “Take advantage of it now if you’re in the position to,” Rossi said.
The local realtor says what he’s seeing in his line of work because of the lower interest rates are people being able to afford more expensive homes than they otherwise would. “Now you’re looking at rates that are down. You’re now getting more buying power on the buy side — quarter of a point could be 20,000 to 30,000 of buying power, so it adds up,” Rossi said.
What interest rate you’ll get depends on your financial situation and credit score. But in general, if you’re paying in the four percent range or higher right now, Parent says you might want to give your mortgage company a call to see if you can get something in the threes. Or if you want a shorter mortgage, he says this might be a good time to do that. In one scenario we had him run for us, we saw someone save $40,000 or so by switching from a 30-year to 15-year and they didn’t have to pay that much more each month.