The coronavirus pandemic has turned the world upside down. Investors have been on edge, as the market took a major downturn when the virus began to take hold in early 2020. However, several actions taken by the Federal Reserve could benefit homeowners or those wanting to take out a mortgage in the coming weeks or months. Business investor and executive Ken Loeb recently discussed how the COVID-19 pandemic is affecting homeownership and mortgage rates.
“It’s difficult to find any positives coming out of the coronavirus pandemic,” Ken Loeb said. “But record-low mortgage rates could benefit a number of Americans.”
Kenneth Loeb explained that the Federal Reserve made an emergency mortgage rate cut on March 3, 2020. Less than two weeks later, the Fed made another major cut. This number is not expected to rise again until the economy has made a full recovery from COVID-19, which could be months or even years.
“Home sales dropped drastically in the spring of 2020, but sales began to rise again in the summer months,” Ken Loeb said. “Those shopping for mortgages or home equity lines of credit realized these record low rates may not last forever, so they jumped on the opportunity.”
However, Kenneth Loeb explained that despite incredibly low mortgage rates, those shopping for homes may find it difficult to locate a quality home in their price range. Mortgage rates are at record lows, but there are still less houses on the market than before the pandemic. This can result in higher home prices and a smaller selection of potential homes. Ken Loeb suggested having a mortgage preapproval letter in hand when shopping for homes could give the sellers confidence that you’re prepared to buy. Also, being flexible on the closing date could be more desirable for the seller.
Kenneth Loeb added that refinancing has become a popular option throughout the pandemic. Record low rates are enticing homeowners to refinance, and lenders are dealing with extremely heavy workloads. Ken Loeb recommends shopping multiple lenders to get the best possible deal and to fully understand why you want to refinance. Lowering your monthly payment or shortening the term of your loan could be extremely beneficial. However, Ken Loeb advised against a cash-out refinance, as it could reduce equity during a time when you may need it as a backup source of cash.
“The economy is extremely uncertain right now,” Kenneth Loeb said. “Speaking with a qualified financial advisor is recommended if you’re considering refinancing or making a major purchase. They can help you determine how much house you can safely afford and if refinancing now will benefit you long-term.”