If you're a homeowner, have you refinanced your mortgage lately — to slash your interest rate and monthly payment? Maybe you've been putting it off, even though a new refinance fee is threatening to push mortgage rates higher.
Investing sage Warren Buffett, who recently turned 90, would probably tell you to stop procrastinating. Rates on 30-year fixed-rate mortgages are averaging just 2.87%, only a hair above an all-time low, according to the most recent weekly survey from Freddie Mac. The mortgage company has been monitoring rates for almost 50 years.
"This is a very good time to borrow money, which means it may not be such a great time to lend money, but it’s good for the country that it’s a good time to borrow money," billionaire Buffett said a few months ago during his company's annual shareholders meeting, held online.
He's been on a borrowing binge himself, and at some truly unbelievably rates. You can do pretty well, too, if you follow his lead.
Borrow like Buffett
To shore up an economy against the coronavirus, the Federal Reserve in mid-March slashed a key interest rate nearly to zero. More recently, at their September policy meeting, Fed officials signaled they'd keep rates at next to nothing until 2024.
Buffett hasn't figured out a way to borrow at 0% interest (at least not yet), but his Berkshire Hathaway company did come close earlier this year as it benefited from the low-rate environment the Fed helped create.
In an April filing with U.S. regulators, Berkshire said that through a bond offering priced in Japanese yen, it would be taking on the equivalent of over $1.8 billion in debt — at rates ranging from 2% to just 0.674%.
You won't find mortgage rates way down in that neighborhood, but they have been breaking records thanks in part to the Fed's extreme rate cutting and its other moves to help the economy.
During a 2017 CNBC interview, Buffett called the 30-year mortgage "the best instrument in the world" — because of your ability to refinance when you find a lower rate.
"If you’re wrong and rates go to 2%, which I don’t think they will, you pay it off," he said at the time. "It’s a one-way renegotiation. It is an incredibly attractive instrument for the homeowner and you’ve got a one-way bet."
Still on the fence? Hop off
Many households have seized upon the sliding rates on home loans. During the spring, Americans were applying for refinance mortgages at three and four times the levels seen a year ago, according to the Mortgage Bankers Association.
"With many homeowners still facing economic and employment uncertainty, these refinance opportunities will allow them to save money on their monthly payments, which can then be used to help other areas of their budgets," says Joel Kan, the trade group's vice president of forecasting.
At current rates an estimated 19.3 million homeowners are sitting on loans they could refinance to cut their monthly costs by an average $299, the mortgage data firm Black Knight has said.
Still waffling? You're in a good position to refinance if you currently have a 30-year mortgage at 3.65% or higher, and if your credit score is exceptional (800 or higher) or very good (740 to 799).
You need to shop around quickly, because many lenders have begun raising their rates to pass along a 0.5% fee that will be applied to most U.S. refinance loans this fall.
Warren Buffett says it's a good time to borrow money. Maybe it's your time to slash the cost of your mortgage.