The record-low interest rates over the last 12 months have become a major talking point for our economy.
To get our customers up to speed, we talked about mortgage and refinance interest rates with Jeni Weaver, President of Landed Home Loans, a Landed affiliate business.
As a seasoned lender with nearly 20 years of industry experience, Jeni is an expert in all things mortgage- and refinance-related. Here’s what she had to say about current interest rates and trends to look out for:
Why are mortgage interest rates so low right now?
JW: Average interest rates for a 30-year fixed mortgage fell below 4% in early 2020, and have tumbled further since the beginning of the pandemic. This is because the Federal Reserve lowers its benchmark interest rates to discourage saving and encourage spending when the economy is weak. As a result of the low rates, we’ve seen a lot of activity in the housing market!
Where do you think mortgage interest rates will be in 3-6 months?
JW: We don’t expect mortgage interest rates to go down any further. As of February 2021, rates are still surprisingly low, but will probably trickle up as COVID-19 vaccines are made more available and the pandemic comes under control. Also, the Biden Administration’s proposed tax credit of up to $15K for first-time homebuyers would likely fuel additional activity, which could have the effect of pushing up rates.
Jeni Weaver, President of Landed Home Loans.
What determines my mortgage interest rate?
JW: Good question! While average rates are a good reference point, your interest rate will depend on a few factors, including:
- Your credit score: A score of 740 or higher is ideal.
- Your loan-to-value (LTV) ratio: A 70% LTV ratio, which requires a 30% down payment, gets you a lower rate than an 80-90% LTV ratio.
- Your property type: Rates are often a bit higher for condominiums and multi-family properties, and lower for single-family homes and townhomes in new developments.
Basically, lenders respond to risk. The riskier they perceive the loan to be, the more expensive the loan will be for the borrower.
What if I’m looking to refinance? Are refinance rates always the same as mortgage rates?
JW: While they also follow benchmark interest rates, refinance rates tend to be a tad higher than mortgage rates. However, for all new refinances after December 1, 2020, Fannie Mae and Freddie Mac have applied an “Adverse Market Delivery Fee” equal to 0.5% of the loan amount, which can be financed into your rate. And if you use a refinance to take cash out from your home’s equity, your rate will also increase because of increased risk to the lender.
What’s the one thing you think homebuyers should know about interest rates today?
JW: These are the lowest rates we’ve ever seen, so now is the time to act! There is no guarantee that rates will fall further, so I strongly recommend not waiting for them to go down. And keep in mind, having a low rate means much more affordability. Even small changes in your rate can make $100Ks of difference in what you can afford. And when you combine these low rates with the support of Landed, you’ll be amazed by what you can achieve in your home search!
We couldn’t agree more with Jeni!
So as you’re thinking about buying a home, we recommend that you start by gathering as much information as possible. Our team would be thrilled to help you find the right resources, including a lender and agent, to make your homebuying journey successful: