Mortgage rates have recently trended higher, after hitting record lows in January. But if you’re a homeowner and haven’t refinanced your loan in the past two years, you might be run out of big savings.
Last week, rates fell for the first time in nearly two months – all the more reason to stop procrastinating.
The wise 90-year-old investor, Warren Buffett, would be wondering what are you waiting for.
“It’s a great time to borrow money, which means it might not be such a good time to lend money, but it’s good for the country it is. a good time to borrow money, ”billionaire Buffett said during his company’s 2020 annual shareholders. meeting, held online.
Buffett himself has been on some sort of borrowing frenzy, and at truly mind-blowing rates. You can also do very well if you follow his example.
Use Buffett as a template
To support an economy at the start of the coronavirus crisis, the Federal Reserve last year cut a key interest rate to almost zero. More recently, Fed officials announced they would keep rates next to nothing until 2024.
Buffett hasn’t found a way to borrow at 0% interest (at least not yet), but his holding company Berkshire Hathaway moved closer last year as it benefited from the low rate environment of the Fed.
In April 2020, Berkshire said that with a bond offering priced at the Japanese yen, it would take on the equivalent of more than $ 1.8 billion in debt – at rates ranging from 2% to a mere 0.674%.
You won’t find very low 30-year mortgage rates in this neighborhood, but 30-year fixed-rate mortgages currently average 3.13%. Despite recent increases, rates are still historically low.
In a CNBC interview in 2017, Buffett called the 30-year mortgage “the world’s best instrument” – because of your ability to refinance when you find a lower rate.
“If you’re wrong and the rates go down to 2%, which I don’t think they will, you pay it,” he said at the time. “It’s a one-sided renegotiation. It’s an incredibly attractive instrument for the owner, and you’ve got a one-sided bet.”
Refinancing saves an average of $ 277 per month: study
And remember, Buffett knows a few things about the housing market. In addition to his company’s investments in energy, insurance and telecommunications, Berkshire also owns HomeServices of America, the largest residential real estate brokerage in the United States, according to RealTrends.
Many households have taken advantage of low mortgage rates. At the end of January, Americans were asking for refinancing mortgages at their highest since last March, although the pace has slowed, according to the Mortgage Bankers Association.
At current rates, an estimated 11.1 million homeowners are sitting on loans they could refinance to lower their monthly costs by an average of $ 277, mortgage technology and data provider Black Knight recently reported.
You can use your savings to invest – perhaps with the help of a popular app that lets you grow your portfolio by simply using “spare currency”.
Still on the fence about a refi? You are in a good position to do this if you currently have a 30-year mortgage at around 3.9% or more, and if your credit score is exceptional (800 or more) or very good (740 to 799).
When Warren Buffett Says Now Is A Good Time To Borrow Money, It Might Be The Time For You reduce the cost of your mortgage.