Mortgage rates have been on an upward trend recently, after reaching record lows in January. But if you’re a homeowner and haven’t refinanced your loan in the past year or two, you may be losing big savings.
Last week, rates fell for the first time in almost two months – yet another reason to stop procrastinating.
Wise investor Warren Buffett, 90, would wonder what you’re waiting for.
“This is a good time to borrow money, which means it may not be a good time to borrow money, but it is good for the country that it is a good time to borrow money,” said billionaire Buffett during annual shareholders. of your company in 2020 meeting, held online.
Buffett has also been on a kind of loan spree, and at really impressive rates. You can also do very well if you follow his example.
Use Buffett as your model
To support an economy during the onset of the coronavirus crisis, the Federal Reserve last year lowered a basic interest rate to almost zero. More recently, Fed officials have signaled that they will keep rates at almost nothing until 2024.
Buffett did not find a way to borrow at 0% interest (at least not yet), but his holding Berkshire Hathaway came close last year as it benefited from the Fed’s low interest environment.
In April 2020, Berkshire said that through a Japanese yen-listed bond offering, it would be assuming the equivalent of more than $ 1.8 billion in debt – at rates ranging from 2% to mere 0.684%.
You won’t find very low 30-year mortgage rates in this neighborhood, but 30-year fixed-rate mortgages are now averaging 3.13%. Despite recent increases, rates have almost never been so low.
During an interview with CNBC in 2017, Buffett called the 30-year mortgage “the best instrument in the world” – due to its ability to refinance when you find a lower rate.
“If you’re wrong and the fees go to 2%, which I don’t think they will, you pay,” he said at the time. “It is a unilateral renegotiation. It is an incredibly attractive instrument for the owner and you have a unilateral bet.”
Refinancing saves an average of $ 277 a month: study
And remember, Buffett knows a few things about the real estate market. In addition to its company’s investments in energy, insurance and telecommunications, Berkshire also owns HomeServices of America, the largest residential real estate broker in the United States, according to RealTrends.
Many families have taken advantage of the low rates on home loans. In late January, Americans were applying for refinancing mortgages at the strongest rate since last March, although that rate has slowed, according to the Mortgage Bankers Association.
At current rates, it is estimated that 11.1 million homeowners are without loans that they could refinance to cut their monthly costs by an average of $ 277, recently reported mortgage technology and mortgage data provider Black Knight.
Are you still on the fence? You are in a good position to refinance if you currently have a 30-year mortgage of around 3.9% or more, and if your credit score it is exceptional (800 or higher) or very good (740 to 799).
When Warren Buffett says it’s a good time to borrow money, maybe it’s time for you reduce the cost of your mortgage.