My loan is at 5.625%

Mortgage and Lending with First Priority Financial NMLS #243484

Yes, I am a full time mortgage professional and the loan I have on my house is a 30 year fixed rate of 5.625%. Why didn’t I refinance into something better you ask. Because my Total Loan to Value is too high to get a new loan to refinance my home.

 I am sharing this to shed light on a subject in a very real way. I got a great rate of 5.625% on my own house in 2003 and then later when values were way up a few years later I pulled money out with an equity line and bought a duplex as an investment. The market then took a big turn and my duplex and my house were both worth less and now both of my homes were under water (I owed more than they were worth).

 I have always warned clients not to use their homes as an ATM and pull money out to buy wave runners etc. and I thought I was being smarter because I was buying real estate. I tell you that it would have been a whole lot cheaper and a whole lot more fun if I had bought a nice pair of wave runners with my equity. Values go up and down and currently they are on the rise and so are interest rates.

As I was telling my wife that historically a 5.625% rate is really good, I heard it as a consumer who could not get the low rates of today and that statement did not comfort me. My rate and my circumstances keep me humble when speaking with clients about their situation.

Mortgage rates were the lowest they have ever been in 2013. Rates have moved from the all time low and are in the mid to high 4’s currently. They are still damn good but that doesn’t help if it means you can’t get a house now but you could 3 months ago.

 Property values are on the rise and interest rates are as well. Whether you are thinking of buying or refinancing, it is just a math word problem (if a train is leaving Chicago at 73 mph…). If you want to buy a house, you just need to figure out how much you qualify for, how much are you comfortable paying, how much will it cost you and can you find a house that matches your criteria?

 If you want to refinance, the questions are; How much will it cost me?  and How much will it save me per month? This is a much simpler equation and you don’t have the added variables of selling another house or getting together a down payment.

 Even though rates are a little higher than a few short months ago, they are still amazing and they will not stay that way forever. Rates move with the market just like stock and bonds and you can look at historical graphs to see that they were 7 to 12% in the 70’s and as high as 17% in the early 80’s moving down to 10% by the end of that decade. In the 90’s we saw them move into single digits just below 7% and in the 2000’s we went from a high of 8% to as low as the low 3’s so all I can tell you is that it seems like it is time to go back up now that we have hit bottom.

 Housing prices have were relatively flat from 1900 to 1940 and after WWII we see a steady rise until 1989 (when I got in the business) and then we see values go down they start to recover in the mid 90’s and in the 2000’s they go crazy until we hit the middle of that decade and then we get slammed and now we are back in recovery and growth mode.

 The nice part is if you buy a house to live in it and you end up making money that is a bonus.

 Need to know more? Please send me your real estate and mortgage related questions. I am happy to answer you and it may become the topic of a future article.

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