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By Ralph Dibugnara March 6, 2025 By: Paul Centopani February 26, 2025 https://themortgagereports.com/32667/mortgage-rates-forecast-fha-va-usda-conventional Mortgage rate forecast for next week (Feb. 24-28) Mortgage rates came down for the fifth straight week. The average 30-year fixed rate mortgage (FRM) declined to 6.85% on Feb. 20 from 6.87% on Feb. 13, according to Freddie Mac. “The 30-year fixed-rate mortgage has stayed just under 7% for five consecutive weeks and in that time has fluctuated less than 20 basis points. This stability continues to bode well for potential buyers and sellers as we approach the spring homebuying season,” said Sam Khater, chief economist at Freddie Mac. Will mortgage rates go down in March? “With consumer confidence plummeting and a great deal of uncertainty and volatility in the market as the Trump Administration continues to promise high tariffs and mass deportations, there’s been a flight to safety in the bonds market.” -Rick Sharga, CEO at CJ Patrick Company Mortgage rates fluctuated significantly in 2023, with the average 30-year fixed rate going as low as 6.09% and as high as 7.79%, according to Freddie Mac. That range narrowed in 2024, with a spread of 6.08% to 7.22%. Find your lowest mortgage rate. Start here (Feb 27th, 2025) With the economy possibly heading into a recession, we may have already seen the peak of this rate cycle. But if inflation rises, mortgage rates could uptrend. Of course, interest rates are driven by many factors and notoriously volatile, so they could change direction any given week. Experts from Realtor.com, First American, Home Qualified and CJ Patrick weigh in on whether 30-year mortgage rates will climb, fall, or level off in March. Expert mortgage rate predictions for March Ralph DiBugnara, president at Home Qualified Prediction: Rates will moderate “The market is starting to slowly but steadily see some small movement of mortgage rates coming down. I believe March will be around the same averages we have seen through February. Historically, we would see the greatest drop in mortgage rates come during the spring buying season. If inflation ticks down and consumer spending slows along with increased seasonal home buying, we should see a significant reduction in interest rates.” Hannah Jones, senior economic research analyst at Realtor.com Prediction: Rates will moderate “Mortgage rates are likely to remain high through March. We may see some volatility as markets weigh the implications of the Trump administration’s various economic proposals and policy actions. PCE inflation data could influence rates, especially if it comes in higher-than-expected. Overall, we expect both inflation and mortgage rates to be higher for longer than initially expected, but the path is not yet clear due to considerable policy uncertainty.” Rick Sharga, CEO at CJ Patrick Company Prediction: Rates will moderate “With consumer confidence plummeting and a great deal of uncertainty and volatility in the market as the Trump Administration continues to promise high tariffs and mass deportations, there’s been a flight to safety in the bonds market, driving down bond yields. Because of those lower yields, we’re seeing what is probably a temporary dip in mortgage rates, which could reverse course suddenly if the next inflation report comes in higher than expected. But for now, it looks like rates for a 30-year fixed-rate loan will rest somewhere between 6.75-7.0% for at least the next few weeks, while the market settles into its new reality.” Sam Williamson, senior economist at First American Prediction: Rates will moderate “With a strong U.S. labor market and inflation running hotter than anticipated, the Federal Reserve is likely to hold off on cutting interest rates at its upcoming March meeting. This limits downward pressure on 10-year Treasury notes, which mortgage rates tend to follow. Consequently, we expect mortgage rates to remain stable in March, fluctuating in the upper 6% range.”

By Ralph Dibugnara February 27, 2025 By Erik Martin February 4, 2025 Best Ways to Tap Home Equity for Home Improvements | Mortgages | U.S. News Using your home equity financing products may allow you to borrow more at a lower interest rate compared to credit cards or personal loans. Key Takeaways Tapping into home equity can provide substantial funds for home improvements at lower interest rates than personal loans or credit cards. Home equity loans, HELOCs, cash-out refinances and FHA 203(k) rehab loans have distinct advantages and drawbacks. While using home equity for renovations can enhance property value, it's crucial to consider closing costs, foreclosure risk and the impact of fluctuating property values. Thanks to strong home appreciation, Americans have accumulated $35 trillion in home equity, which can fund renovations and improvements that boost their home's appeal and resale value. There are several popular ways to liquidate home equity, including a home equity loan, home equity line of credit, cash-out refinance and FHA 203(k) rehab loan. Homeowners should consider each home improvement loan's pros and cons and determine which option will best meet their needs. You don't necessarily have to pull from your home equity to fund a major remodel or other home improvement goal. Other options include taking out a personal loan, using credit cards, or applying for a personal line of credit from a bank or lender. However, a home equity loan or line of credit is often a smarter move. Loans backed by home equity are less risky for lenders, so their interest rates are lower and terms are more favorable. Take a closer look at the advantages and disadvantages of using home equity to improve your property. SEE: Best Home Equity Loans Pros of Using Home Equity for Remodel You Can Borrow More If you have a lot of unused home equity, you may qualify to borrow a lot more than the limits imposed by non-home-equity financing options, like personal loans or credit cards. Consider that the average home renovation project budget in 2025 is more than $52,000, with typical expenses ranging from around $19,000 to more than $88,000 for most homeowners, according to digital marketplace HomeAdvisor. "You are borrowing against your home when you tap home equity, and right now people are sitting on a ton of equity," says John Horton, senior vice president of mortgage lending with A and N Mortgage Services Inc. "Over the last seven to eight years, the average increase in home equity has been between 9% and 10% per year." Interest Rates Are Lower Home equity financing products typically offer lower interest rates than credit cards or loans not backed by real estate. Paying a lower rate means potentially saving thousands over the life of your loan. A Flourish chart Enjoy Longer Repayment Terms Home equity repayment terms generally run between five and 30 years. Extending repayment reduces your payment and can make the loan more affordable. Most personal loan providers set their maximum term at five to seven years. Reap Tax Savings "You could be eligible for a tax deduction on the interest you pay for a home equity loan or HELOC if you use it for a home improvement project, although you'll need to consult with your tax advisor to see if you qualify," says Aaron Craig, vice president of mortgage and indirect sales for Georgia's Own Credit Union. Cons of Using Home Equity for Remodel You'll Pay Closing Costs Expect to pay 2% to 5% of the loan amount or credit limit at closing. Fees and interest rates can vary widely among lenders and products, so it's important to compare. Your Home Is at Risk Home equity financing is secured by your home. Missing home equity loan payments could lead to default and foreclosure, even if your first mortgage is in good standing. You May Pay More Interest Than You Think The longer repayment terms available with home equity financing are a double-edged sword. That's because extending the repayment period to lower what you pay each month increases your interest cost over the life of the loan. You can calculate the total interest expense by multiplying the monthly payment by the number of scheduled payments and then subtracting the loan amount. Interest Rates and Payments Can Increase Many HELOCs come with variable interest rates that can change your payment and costs significantly over the life of the loan. In addition, HELOC terms are divided into a drawing phase, typically five to 10 years, during which the borrower can make a minimum or interest-only payment. Once the drawing period ends, the entire balance must be repaid over the remaining loan term, and payments can rise sharply. Many borrowers are unprepared for this. Getting Approved Could Take Longer The lender must appraise the property in addition to evaluating your credit history, income and debts. "Since it is a loan secured on your home, home equity financing usually takes a little longer to fund than a consumer loan alternative, like an unsecured personal loan. But this isn't a big deal unless you are under a tight deadline and need the money quickly," Craig says. It Could Lead to Negative Equity Tapping a substantial portion of your home's equity can be risky if property values decline, leading to negative equity. This occurs when your outstanding loan balance surpasses your home's current market value, thereby limiting your ability to refinance or sell the property. Calculate: Use Our Free Mortgage Calculator to Estimate Your Monthly Payments. Best Home Improvement Loans Now that you have a better idea of the pluses and minuses of going the home equity financing route, which borrowing vehicle is best for you? HELOC A HELOC is a flexible line of credit that works similarly to a credit card. You can borrow as needed up to a preset limit and only pay interest on the amount you use. HELOC lenders generally allow total borrowing against 80% to 90% of the home's value. If your home is worth $100,000 and you owe $70,000 on your existing mortgage, you may be able to borrow an additional $10,000 to $20,000 with a HELOC. The interest rate on a HELOC is typically variable, meaning it can fluctuate depending on market conditions. Some lenders offer fixed-rate HELOCs or convertible HELOCs, which give the borrower more control over their interest rate and payment. A HELOC operates in two main stages: the draw period and the repayment period. During the draw period, you can borrow against the line of credit and are only required to make minimum or interest-only payments on your balance. The draw period typically lasts five to 10 years. Once the loan moves into the repayment phase, you can no longer access the credit line. The required payment will be adjusted to cover your interest and pay off your balance during the remaining loan term. "HELOCs are a great way to access home equity, acting almost like a credit card on your home," says Ralph DiBugnara, president of Home Qualified. "This is a line of credit that traditionally follows the prime borrowing rate, which historically is somewhere between 0.35% and 0.5% above the average 30-year mortgage interest rate. Right now, however, that is a disadvantage because it's providing a rate in the mid- to high-7% range." Even a HELOC with a variable interest rate won't necessarily cost you more than a fixed-rate home equity loan. "Your payments could actually decrease if interest rates fall. Interest rates are usually lower on a HELOC than on a home equity loan," Craig says. Home Equity Loan As with a HELOC, you can likely borrow against 80% to 90% of your property value with a home equity loan. You receive a lump sum when you close your loan, and you repay it with fixed monthly payments. Home equity loan terms typically run between usually five and 20 years, with some lenders offering up to 30 years. "It's a solid choice if you have a well-planned project and can comfortably manage the repayments," says Carl Holman, director of communication and content for A&D Mortgage. However, you could underestimate the project and end up needing more money than you agreed to borrow, "or you could overspend by borrowing more money up front than what the project ends up costing," cautions Craig. "You also have limited flexibility to borrow any more funds using your home equity if additional dollars are needed for the project. That means you'd have to secure an additional loan." Cash-Out Refinance A cash-out refinance involves replacing your existing mortgage with a new, larger loan, allowing you to take the difference in cash. Lenders typically approve cash-out refinances up to 80% of your home's appraised value. "A cash-out refi provides a large lump sum at closing and may come with a lower rate than a home equity loan or HELOC. Plus, the interest could be tax deductible," Holman says. "However, it reset your primary mortgage loan term, which could mean paying more interest over time." Also, closing costs – usually 2% to 5% of your loan amount – could be significant. Cash-out refinancing can be a good option if you're looking to tap into your equity and can secure a better rate for your primary mortgage. Craig adds that a cash-out refinance can be more budget-friendly because you only have one payment to make instead of a monthly bill for your mortgage and a separate bill for your HELOC or home equity loan. However, a cash-out refi can be quite costly if your refinance amount is large and the equity cash-out portion is relatively small. That's because the closing costs apply to the entire mortgage, not just the cashed-out equity. Read: Best Home Improvement Loans. FHA 203(k) Rehab Refi The FHA's 203(k) Rehabilitation Mortgage Insurance program enables homebuyers to finance both the purchase and renovation costs of a property with one loan. If you already own a home, you can also refinance your existing mortgage while incorporating the costs of necessary repairs or improvements into the refinance. This approach is particularly advantageous if you have little equity, as the refinance loan-to-value is based on the improved value of the property, not its current value. The limited 203(k) loan allows financing up to $75,000 for non-structural repairs and improvements, such as kitchen remodels or new carpeting. There is no minimum borrowing amount, and it's suitable for minor renovations. The rehabilitation period for this loan is nine months. The standard 203(k) loan covers more extensive renovations, including structural repairs, and has a minimum borrowing amount of $5,000. It mandates the involvement of a 203(k) consultant to oversee the project and has a rehabilitation period of 12 months. "These loans are accessible to borrowers with lower credit scores and smaller down payments and offer a streamlined option for smaller projects," Holman says. "However, it requires more paperwork, FHA inspections, and mortgage insurance premiums, and it's limited to primary residences. But it's a solid choice for buyers tackling major renovations." Which Is the Best Option for You? The right home equity financing choice for you depends on your needs, budget, timeline and other factors. A home equity loan is best for a borrower who currently has a very low interest rate on their first mortgage, can afford additional loan payments, has a pretty good idea of how much the home improvements are going to cost, and likes the stability of a fixed rate and fixed term. A HELOC is better for someone who isn't quite sure how much home improvements are going to cost and wants some flexibility but is OK with a variable interest rate. If you have a high interest rate on your first mortgage and can benefit from refinancing to a lower rate, a cash-out refinance could be a good option. A homeowner with low equity and limited funds available should consider an FHA 203(k) loan.

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