At times, it’s difficult to determine what effects the financial markets have on us as individuals. For example, with the continued spread of coronavirus, or COVID-19, interest rates have fallen significantly as investors flee from stocks and move to United States Treasurys for safety and security. Upon reading that, you might ask, “What does this mean for me?” If you’re a homeowner with a mortgage, it could mean you have an opportunity to save money.
Lower interest rates open the door for homeowners to adjust their term or lower their monthly payment through refinancing, and we believe an additional advantage of a lower monthly payment is that it frees up cash flow that can be used to make extra payments on the mortgage or other debt. This could allow homeowners to become debt-free more quickly while paying less interest in the process.
Although there are many general rules of thumb in financial planning, there aren’t many, if any, one-size-fits-all solutions. A drop in interest rates doesn’t mean you need to act, but it’s worth considering. If you’re thinking about refinancing your mortgage or buying or selling your home, it’s sensible to work with someone knowledgeable on these topics as well as your financial advisor to evaluate the impacts of doing so on your financial plan.