Money Management

Lower mortgage rates are leading to an uptick in refinances. But should you get a new mortgage now? Read on to find out. [[{“value”:”

If you signed your mortgage in the past couple of years, you may have done so grudgingly. Mortgage rates have been elevated since they started climbing in 2022. And given that mortgage rates fell to record lows in 2020 and 2021, recent borrowing rates have been a tough blow for home buyers.

The good news is that if you’re unhappy with the mortgage rate you initially locked in, you’re not stuck with it forever. You could refinance your mortgage and lower its interest rate. And it appears as though many homeowners are suddenly going this route.

For the week ending Sept. 20, mortgage applications increased 11% from the previous week, according to the Mortgage Bankers Association. Refinance applications, meanwhile, rose 20% from the previous week and jumped to their highest level since July 2022.

Given this trend, you may be eager to hop on the refinance bandwagon. But here’s why you may want to wait a bit longer to swap your existing mortgage for a new one.

Mortgage rates are expected to continue falling

On Sept. 19, the average 30-year mortgage rate fell to 6.09%, the lowest average rate since February 2023. And it’s not a coincidence it happened right after the Federal Reserve made its first long-awaited federal funds rate cut on Sept. 18.

To be fair, mortgage rates started falling before the Fed’s rate cut. And mortgage rates are influenced by a number of factors, the Fed’s benchmark interest rate being just one of them.

But in the coming months, the Fed is expected to continue cutting interest rates to reverse the numerous hikes it implemented in 2022 and 2023. The Fed is able to lower its benchmark interest rate because inflation has been slowing steadily. As the Fed moves forward with rate cuts, borrowing rates across the board are likely to come down, mortgage rates included.

For this reason, you may want to wait for a few more rate cuts from the Fed before you refinance your mortgage. If you sit tight until early 2025, for example, you may find that you’re able to snag a considerably lower rate on a new mortgage than you can today.

Should you refinance?

As a general rule, it pays to refinance a mortgage when you can shave about 1 percentage point or more off of your loan’s interest rate. So if you signed your mortgage at 6.59% and rates are sitting at 6.09%, that may not be enough savings to warrant a refinance. But if you locked in a mortgage at 7.19%, refinancing makes more sense — and it could save you a nice amount of money.

One thing to remember about refinancing, though, is that it’s not free. You’re charged closing costs to refinance a mortgage the same way those fees apply when you put an original mortgage in place.

Closing costs can amount to 2% to 5% of your mortgage amount. For a $300,000 loan, you’re looking at $6,000 to $15,000.

That’s why you want to make sure you’re getting a considerably lower interest rate when refinancing. You want your monthly savings on your mortgage payments to be substantial enough to justify your closing costs.

How much longer do you plan to stay in your current home?

You also need to ask yourself whether you plan to stay in your home long enough to recoup closing costs on a refinance. Say you pay $6,000 to put a new loan in place that leads to $250 in monthly savings. It will take 24 months to break even on that $6,000 expense.

If you think you’ll move in two years or less, a refinance won’t do you any good. But if you’re convinced you’ll stay in your home for at least five more years, then in this situation, refinancing does make sense.

It’s easy to see why so many homeowners are rushing to refinance today. But as tempting as that may be, an even better move could be to sit tight a bit longer and wait for rates to drop further.

If you can lock in a new mortgage at under 5%, you stand to enjoy even more savings on your monthly payments. If you’re managing your current payments reasonably well, then you might as well wait a few more months and see where rates land.

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Sam’s Club is a good place to buy cheap gas, but Costco might be a better option. Read on to find out why. [[{“value”:”

Signing up for a discount warehouse club may be smarter than ever, considering that many food and household products are currently priced far higher than just a few years ago. When deciding which club to choose, both Sam’s Club and Costco are popular options, especially because they both offer cheap gas.

Sam’s Club and Costco gas prices can be between $0.05 to $0.25 cheaper than the average gallon of gas at your local gas station. But does it matter which discount gas you buy? It does if you want to protect your engine and maximize your fuel economy.

Costco’s premium fuel at discount prices

Unlike Sam’s Club, Costco sells what’s called TOP TIER™ fuel that’s proven to help engines run cleaner and more efficiently.

If you’re skeptical that a certain type of fuel can help your vehicle, I get it. I usually don’t pay much attention to the gas I’m putting in my car either, but that doesn’t mean it doesn’t matter.

Here’s what some extensive AAA research found about TOP TIER™ fuel a few years ago:

TOP TIER™ fuel is proven to reduce carbon buildup and deposits on intake valves10 of the leading automakers recommend TOP TIER™ fuel for their vehiclesTOP TIER™ fuels help improve fuel economyThe fuel can make engines idle smoother, improve acceleration, and reduce engine knocking

If that weren’t enough, Consumer Reports said recently that “motorists would benefit from using TOP TIER™ gasoline as their primary fuel.”

This doesn’t mean that Sam’s Club gas is terrible for your car, but if you’re looking for a great deal on gas prices and want the best fuel possible, Costco gas is probably the best choice.

You might save on these vehicle costs, as well

In addition to getting higher-quality gas at Costco, you can help protect your budget with some of the club’s other vehicle-related perks. For example, Costco offers free installation with your tire purchase and a five-year road hazard warranty, while Sam’s Club charges $20 per tire for its premium installation.

It’s worth mentioning that while you’ll pay for tire installation at Sam’s Club, the purchase does include four years of roadside assistance, which is a nice perk.

But if you really need to lower your car-related expenses, you should consider Costco’s car insurance option. Costco sells home and auto insurance, and bundling the two could save you tons. Costco says that members who sign up for home and auto insurance save about $600 in their first year on their car insurance premiums.

Finding cheap car insurance is getting harder and harder these days, considering that auto insurance costs have risen more than 18% over the past year.

If you’re considering switching to Costco to save on your insurance costs — and get higher-quality fuel — you can always cancel your Sam’s Club membership. The warehouse club says you can cancel anytime and receive a refund.

All of this means that if you live near Costco, are overpaying for car insurance, and want to keep your car running as efficiently as possible while still paying less for gas, switching to Costco could be an excellent choice.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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CD rates may have peaked, but if you’re looking to lock in a high interest rate, it isn’t too late. Find out more here. [[{“value”:”

The Federal Reserve recently cut its benchmark interest rate for the first time since early 2020, and as you might expect, the interest rates paid by top financial institutions on high-yield savings accounts and CDs have trended downward as a result. Many savers could regret not locking in interest rates on CDs while they were at their highest level since the financial crisis.

However, it could still be a good time to put money into CDs, especially those with longer terms like 5-year CDs. While you might not get the absolute highest rates that have existed in the past year, that doesn’t mean it’s too late either. And there are two big reasons why you might still want to consider 5-year CDs for your money.

Two reasons why it isn’t too late

To be perfectly clear, the peak of CD rates is likely behind us. The benchmark interest rates set by the Federal Reserve are a big factor that determines how much banks are willing to pay CD customers.

However, there are two big reasons why it isn’t too late to put money in a 5-year CD today.

1. More rate cuts are on the way

First, the Federal Reserve’s September rate cut was sharper than expected, but it was still just one step in what is likely to be a longer rate-cutting cycle. The target range for the federal funds rate declined from 5.25%-5.50% to 4.75%-5.00%. This is still a high benchmark rate in the context of recent history.

2. Long-term CDs are less reactive

Second, and more significantly, while all CDs are reactive to the Fed’s rate moves, long-term CDs aren’t nearly as reactive as shorter-term CDs. For example, in the roughly one week between the Fed’s interest rate cut and the time of this writing, the yields paid on our top 1-year CDs have generally declined by about half a percentage point, in line with the Fed’s move.

On the other hand, while benchmark rates certainly play a role in 5-year CD yields, their rates are more dependent on expectations for future interest rates. And expectations haven’t really changed much. Financial markets were pricing in a total of about 2 percentage points of rate cuts by the end of 2025 prior to the Fed meeting, and the median expectation remains the same.

So, 5-year CD rates haven’t changed as much as shorter-term CDs. The 5-year yields paid by the top online banks were in the 3.75%-4.00% range prior to the Fed’s rate cut, and these rates are readily available now.

The bottom line

As the Fed continues to lower rates over the next year or two, it’s likely that CD yields — even 5-year CD yields — will trend lower. However, it’s likely to be a slower, gradual trajectory, and of a smaller magnitude than shorter-term CD yields. So far, the Fed has lowered rates by half a percentage point, and in many cases, 5-year CD interest rates have barely moved, if they’ve moved at all.

In short, if you want to lock in a strong interest rate for the next five years, it isn’t too late just because the Fed has started to cut rates. It could certainly be in your best interest to act before any further interest rate cuts occur (the next Fed meeting occurs in early November), but you still have time.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Experts predict average mortgage rates may fall as low as 5.55% by the end of 2025. Find out what might cause the shift and how the changes will impact you. [[{“value”:”

The last few years have been painful for would-be home buyers. House prices have soared, driven in part by limited supply. Mortgage rates reached 20-year highs and sky-high inflation only exacerbated things.

If you’re hoping our housing market predictions will promise a swift end to the pain, I’m afraid you’ll be disappointed. 2025 will bring small changes and a shift toward improved affordability. But significant change will take time.

Here are three housing market predictions for 2025.

1. Mortgage rates will fall further

Now that the Fed has finally started to cut rates, those cuts will likely continue through 2024 and into 2025. While the Fed rate cuts aren’t directly connected to mortgage rates, they do have a big influence. Estimates vary on how far mortgage rates will fall.

According to Realtor.com, the Mortgage Bankers Association thinks average 30-year fixed mortgage rates could fall to 5.90% by Q4 2025. Wells Fargo estimates they’ll drop to 5.55%. Even a fraction of a percent can affect your total mortgage costs by tens of thousands of dollars.

What it means for you

The low rates we saw during the pandemic were extraordinary and — unless there’s another dramatic global crisis — we’re unlikely to see them again. Rather than hoping for the return of super-low rates, look for ways to qualify for the lowest rate you can.

Focus on your credit score. Make sure you pay your bills on time and try to keep your credit utilization ratio low. Save aggressively so you can build the biggest down payment possible. And shop around to find the best mortgage lender for you.

2. Home prices will rise

There are conflicting predictions about how much house prices will rise next year. Analysts at Goldman Sachs believe they will increase by 4.4% in 2025. Fannie Mae’s Home Price Expectations Survey predicted price growth of 3.1%.

Lower mortgage rates will almost certainly encourage buyers. What’s less clear is whether sellers will come to the party. That’s important because low housing inventory is one reason prices are so high. Having more buyers competing to buy a small pool of properties could drive prices up.

However, some analysts believe we’ll see more properties for sale. There’s a large swathe of people who’ve essentially been locked in by incredibly low pandemic mortgage rates. Falling rates could give them the impetus to sell, which would ease pressure on inventory. It will also be less costly for builders to borrow to build more properties.

What it means for you

Many potential buyers are on the sidelines right now, waiting for mortgage rates to fall further. If you can’t find a property that’s right for you at a price you can afford, it makes sense to hold off and see if rates and inventory improve.

Equally, there are no guarantees that things will improve dramatically in 2025. So if you’re well-positioned financially, with a mortgage pre-approval and down payment at the ready, there are good reasons to go ahead. Especially if you’ve found a property that’s right for you

3. Affordability will ease a little

At one point last year, a typical U.S. household could only afford 16% of the homes that were on sale. Redfin says that’s the lowest it has ever been. Salaries, rates, and house prices all play a part in affordability. But the tide is starting to change.

Redfin tracks the income needed to buy the average U.S. home. In September, that figure fell to $115,000 — the first drop since 2020. Sadly, that’s still considerably higher than the $84,000 earned by a typical household.

It will take time for those dramatic pandemic-induced swings to right themselves. Still, Terry Loebs, founder of Pulsenomics, told Fannie Mae he is hopeful. “A slowdown in home price growth and easing mortgage rates offer a glimmer of hope that the peak of the housing affordability crisis may be behind us,” he said.

What it means for you

If you’ve been trying to buy a home, it probably feels like the deck is stacked against you. On top of the huge costs of buying, high rents make it harder to save for a down payment. The odds might finally be moving in your favor.

Save as aggressively as you can so you’re in a good position to make the most of any market shifts in 2025. Having a big down payment and excellent credit can help you score a lower mortgage rate. If you can take on extra hours at work or a side hustle, that could help reduce the affordability gap.

There are also loan programs designed for low-income households. These include FHA and USDA loans with low (or no) down payments and more flexible loan requirements. The downside is that you’ll have to pay extra private mortgage insurance and there can be strict appraisal requirements.

Don’t expect dramatic changes in 2025

Buyers and sellers are still reeling from what has been a rollercoaster housing market ride in recent years. Next year offers some light at the end of the tunnel, affordability-wise, particularly as mortgage rates are starting to come down. But it will take time. Focus on your financial situation so you can qualify for the best possible home loan when the time is right.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group. The Motley Fool has a disclosure policy.

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If you dislike your high-deductible health plan, the day may come when you’re grateful for it. Take a look at why. [[{“value”:”

About 10 years ago, my husband worked for an energy startup in Southern California. He loved the job and the excitement of being part of a startup. What neither of us liked was the fact that his health insurance plan carried a high deductible.

For years leading up to being diagnosed with a brain tumor, we’d spend a small fortune on alternative treatments for me. We were smack-dab in the middle of paying off debt and found the idea of facing more medical expenses discouraging. We didn’t realize how effectively a high-deductible health plan (HDHP) can help create a more comfortable financial future.

The green-eyed monster

Of all the emotions I experience, envy is one of my least favorite. But the truth is, my green-eyed monster peeks out a little any time I hear about someone having an HDHP. As ridiculous as that sounds, hear me out.

I get that life happens, but it sometimes feels like life has happened to my family a lot. Like millions of Americans, we’ve faced corporate downsizing, serious illness, losing our shirt on a home sale in the middle of the Great Recession, and dozens of financial shocks that set us back. My mother used to say, “One step forward, two steps back,” and I grew to understand precisely what that meant.

What I wish we’d known back when we were whining about the HDHP was how easily having one can result in a brighter financial outlook. If we’d taken a deeper dive into the plan’s details, we would have known.

HDHPs have lower monthly premiums

Lower monthly premiums mean more money can be used for other goals, like paying off debt or building an emergency fund.

Preventive care is 100% covered

We were so focused on how much we might pay in deductibles if one of us became ill that we overlooked how valuable preventive care is. With an HDHP, qualified preventive care is covered 100%. That means we didn’t pay a cent for routine screenings, bloodwork, and tests.

Lower medical expenses

We’ve spent years paying for “wellness care” for our dogs, knowing that it’s better for them physically and for our checking account if we keep them healthy rather than wait until they get sick. The same is true for us as humans. We can minimize the risk of some illnesses by staying on top of routine preventive care, and an HDHP makes staying healthy a little easier.

Access to an HSA is another perk

An HDHP is the only plan that can be paired with a health savings account (HSA). If you’re not familiar with HSAs, here’s a quick rundown of benefits:

You can contribute pre-tax dollars to an HSA through payroll deductions.Voluntary contributions are tax-deductible.Funds contributed to an HSA grow tax-deferred. All interest and earnings on the HSA account are also tax-free.Any withdrawals you make that are spent on qualified medical expenses are not taxed.HSAs are not subject to the rule of “use it or lose it” like flexible savings accounts (FSAs) are. Unused HSA contributions roll over from year to yearOnce money hits an HSA, it’s yours to keep, even if you change jobs, get a new health plan, or retire.

If I had to narrow it down, it’s the last two points on this list that make me wish I had an HSA. With our FSA, we must use the money we’ve contributed within a specific time frame, or it disappears.

That’s not true of an HSA. The funds in an HSA roll over from year to year, earning interest and growing like any other retirement plan. For people like us who are already contributing every dollar we can to our 401(k)s, an HSA would give us another way to make pre-tax contributions toward our future.

A 2023 Gallup poll revealed that 43% of Americans feel they’ll have enough money to retire comfortably. For the rest of us, it’s a matter of playing catch-up and finding ways to tuck as much money away as possible. The one reason to love an HDHP is that it provides you with one more method of automatically investing for your future using pre-tax dollars.

If we’re lucky enough to grow old, we should be fortunate enough to live comfortably, and an HSA can help with that.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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