With 30-year fixed mortgage rates hovering around 3%, homeowners who haven’t refinanced their loans in the past two years could be run out of big savings.
Warren Buffett, a 90-year-old investment sage, would be wondering what are you waiting for.
He told attendees at Berkshire Hathaway’s May annual meeting in Los Angeles that 2021 offers great opportunities for borrowers, thanks to the Federal Reserve’s commitment to keep its key interest rate close to zero.
“The economy fell off a cliff in March Buffett said. “He was resuscitated in an extraordinarily effective way by the actions of the Federal Reserve.”
Mortgage rates have fluctuated this year, but they’re still low enough that you can save hundreds of dollars a month by refinancing your mortgage.
Use Buffett as a template
To support the economy at the onset of the coronavirus crisis, the Federal Reserve last year cut a key interest rate to almost zero. More recently, Fed officials have indicated they will keep rates next to nothing until 2023.
“It’s a fascinating time [for borrowers]Buffett told investors, adding that the low interest rate environment “is extremely pleasant.”
Although Buffett couldn’t find a way to borrow at 0% interest (at least not yet), his holding company Berkshire Hathaway closed last year because it benefited from the low rate environment. from the Fed.
In April 2020, Berkshire said that, thanks to a Japanese yen-denominated bond offering, it was taking 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 a 30-year mortgage rate this low, but 30-year fixed-rate mortgages currently average 2.98%. Despite recent increases, rates are still historically low.
In an interview with CNBC 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 hit 2%, which I don’t think they will, you pay it back,” he said at the time. “It’s a one-sided renegotiation. It’s an incredibly attractive instrument for the owner and you have a one-sided bet.”
Refinancing saves an average of $ 287 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 broker in the United States, according to Actual trends.
Many households took advantage of the low mortgage rates. At the end of January, Americans were asking for mortgage refinancing at the highest since last March, although the pace has slowed, according to the Mortgage Bankers Association.
At current rates, about 14.1 million homeowners are sitting on loans they could refinance to cut their monthly costs by an average of $ 287, mortgage technology and data provider Black Knight recently reported.
You could use your savings to invest, perhaps with the help of a popular app that lets you grow your portfolio. just 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 rating is exceptional (800 or more) or very good (740 to 799).
When Buffett says it’s a good time to borrow money, maybe it’s time for you to reduce the cost of your mortgage.