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February 20, 2020
Mat Lucas

Cash In with Rates at Record Lows

The interest rate gods are shining down on homeowners right now, according to financial expert David Bach, and Americans should take advantage ASAP.

Compare Your Refinance Options With Quicken Loans >

Mortgage rates have been falling for weeks, due in part to the global uncertainty around the coronavirus epidemic. People are noticing — on Feb. 5, the Mortgage Bankers Association reported that the number of applications was at its highest since summer 2013. Even though the volume of applications has slightly tapered off since, the refinance index is up 165% from this time a year ago.

Thus, it’s a great time to refinance your mortgage. Bach, author of numerous New York Times best-sellers including The Latte Factor, tells MONEY there’s “a huge chance” you could lower your rate by 0.5% or 1% by refinancing, which involves applying for a new loan to pay off an existing mortgage (and reaping the benefits).

“It’s truly a ‘historical opportunity to cut your rate’ and potentially save hundreds of dollars, maybe thousands a month, in interest payments,” Bach says. “If you took that savings and applied it to pay down your new mortgage faster, you could be debt free five to 10 years sooner and retire sooner.”

Here’s how to do it.

Get Prepared Now — Thousands Of Dollars Are At Stake

You’ve probably noticed by now that speed is crucial in this process, so get your documents in order.

In particular, Bach says to pull your credit report and credit score before starting your refinancing journey. Not only can you look it over for errors — and head them off — but you can also get an idea of what type of rate you’ll qualify for.

From there, Bach recommends asking the lender what advice they can share to ensure your application gets approved.

“The lender wants to approve and close your loan. They are in the business of doing just that,” Bach says. “So don’t fight the process. Get your lender what they need, as fast as they need it.”

Don’t Talk With Your Current Loan Officer Before Getting a Quote From Another Lender

There are thousands of dollars at stake, so make lenders fight over you. Bach says to be transparent; let the banks know you’re shopping around and that you want to act quickly. This “forces them to give you a competitive rate” or risk missing out on your business.

Keep an eye out for fees and any prepayment penalties. But don’t lose your momentum.

“It’s critical to shop for a loan fast,” Bach says. “You want to do this on the same day and get these banks on your loans and refinance as fast as possible. Shopping and comparing loans on the same day levels the playing field, and you’ll be comparing loans on an apple to apples basis.”

Don’t talk with your current loan officer before getting a quote from another lender.

Find Your Rate Today Before Rates Change >

Don’t Put It Off In Hopes That Rates Will Go Lower

Bach says the No. 1 mistake he sees people make when refinancing their mortgages is waiting to act. Don’t put it off in hopes that rates will go lower, he says.

Mortgage rates shift daily and can be affected by a variety of factors, including oil prices and 10-year Treasury bonds. Because companies have been warning that coronavirus will hurt their earnings, Bach says, the Federal Reserve has kept rates down. But that won’t last forever.

Two weeks ago, the rate for a 30-year fixed mortgage was 3.45%, according to Freddie Mac. Now it’s already up to 3.49%.

“Now is the time to jump on this,” Bach says.

MONEY recently highlighted the best mortgage refinance companies of 2020, which include Quicken Loans and Rocket Mortgage as top picks.

Find Out If You Qualify To Save Thousands >

The views and opinions expressed in this article are those of David Bach and do not necessarily represent those of MONEY. The purpose of this article is to educate and inform, and should not be construed as financial, legal, tax, investment, or other advice. We encourage you to contact a qualified professional to ensure you are making the right decisions to achieve your financial goals. For more details, please read our full disclaimer.

More from MONEY:

Best Mortgage Refinance Lenders of 2020

The New Rules for Figuring Out How Much Home You Can Really Afford

This Chart Shows the Credit Score You REALLY Need to Get a Mortgage

 

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