With interest rates near historic lows, the summer of 2020 is a great time to refinance your mortgage.

The Federal Reserve has held interest rates artificially low during the past several years. But it is likely that mortgage interest rates in the United States will eventually start to rise as the major banks determine there is increased market risk due to economic stress resulting from the pandemic.

Mortgage rates have been kept artificially low during the past decade while the Federal Reserve has tried to prop up the economy on the domestic front. This has hurt anyone with certificates of deposits or other fixed income securities because they have seen a precipitous decline in their passive income stream.

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So, while homeowners and buyers have benefited from the artificially depressed interest rate levels, anyone depending on certificates of deposits or other types of fixed income instruments has taken a tremendous hit on their ability to spend and consume.

As of mid-August, interest rates at the major banks for a 30-year fixed-rate conforming loan are between 2.8% and 3.4%. Interest rates for a 15-year fixed-rate conforming loan have been hovering in the range of 2.3% to 3.1%. The interest rate for any particular property and the costs associated with refinancing will depend on your credit rating and other factors that the lender deems will have an effect on your ability to repay.

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Even though mortgage interest rates have bounced around a little bit in the past year, they are still very close to historical lows. We are certainly a far cry from the economic crisis of the 1980s when interest rates were 14% or even higher. At this point in time, interest rates are not a barrier to the vast majority of people who wish to qualify for a mortgage. The bigger issue is saving until you have a large enough down payment to qualify for conventional financing.

Many homeowners got into trouble during the real estate boom in the last decade when they refinanced their properties and pulled out excess cash to use as spending money. It’s one thing to use the cash to do remodeling, build an addition or do other improvements that will raise the value of your property. But blowing the cash on an exotic vacation or some other discretionary expense will likely cause financial pain somewhere down the road.

It’s a number crunching exercise to determine whether or not refinancing will have a positive economic benefit for your personal situation. If you are planning on staying in your property five years or longer, you’ll normally benefit from refinancing if the interest rate you get is at least one half percentage point lower than you are currently paying.

If you plan to move within the next two to five years, refinancing may or may not have positive cash flow benefits depending on your current interest rate, monthly payment and any costs associated with the new loan. These costs could include appraisal, document fees, origination fee, points and other expenses charged by the lending institution.

It is critical that all of these fees be calculated as part of your cash flow expenditures over the next two to five years when determining whether or not refinancing makes sense for you.

Don Kanare is the founder and Sabrina Belleci is the owner / broker of RE/MAX North Lake.