If you own your own home and haven't refinanced in 2020, why not? Mortgage rates have been lower than ever this year, meaning you might easily slash your interest rate and monthly payment.
Maybe you've been putting it off — and now, a new refinance fee is threatening to push refi rates higher. Investing sage Warren Buffett, who recently turned 90, would probably tell you to stop procrastinating already.
Rates on 30-year fixed-rate mortgages are averaging an all-time low 2.80%, according to the most recent weekly survey from mortgage giant Freddie Mac.
"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 this year.
Buffett been on something of 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 during the onset of the coronavirus crisis, 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 Fed's low-rate environment.
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 30-year mortgage rates way down in that neighborhood, but they have set new lows 10 times this year, Freddie Mac says. That's 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."
Homeowners should move swiftly to beat new fee
Many households have pounced on the tumbling rates on home loans. Earlier in October, Americans were applying for refinance mortgages at a rate 44% higher than 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 been raising their rates to pass along a 0.5% fee on refinance loans that officially takes effect Dec. 1.
Warren Buffett says it's a good time to borrow money. Maybe it's your time to cut down the cost of your mortgage.