Best Holiday Gift Ever? Could Re-Financing be Your Saving Grace?
Did the Federal Reserve give us the Greatest Holiday Gift Ever? Could Re-Financing Your Home be Your Saving Grace?
By Michael J. Maher, MBA
"All my friends are re-financing, should I?"
"I see re-financing everywhere. Is it just a ploy to boost the economy and help these mortgage businesses or is it legit?"
"Will rates go down to 4.5% or should I re-finance now?"
"Can you give me a call? We're looking to refinance the house. But we're more confused than ever after talking to three mortgage people."
If you see yourself asking one of these questions or saying one of these statements, rest assured you're going to get some answers and solutions in this note.
First, let me start off by saying that I am not a mortgage professional. I do not get paid when you re-finance. I have a helicopter-level view of what is going on in the market and am here to help. I coach a few mortgage professionals because building a mortgage business is similar to a real estate business. I study financial data so that I can help the people I know.
For the sake of time and sanity, I'm going to write this in bulleted list format. Some of you straight-to-the-point people will love this. If you are the steady and dependable type, please know that I still love you and your family and we can chat anytime about this, but time is of the essence with this topic. We've already seen the bottom of the rate curve(1) in my opinion.
IN GENERAL! You should re-finance if:
< your rate is 6% or above on a 30-year mortgage
< you are in any kind of an adjustable rate mortgage (ARM) product
< you are in any kind of interest-only product
< you are planning on staying in your home for at least two years
< you want to go from a 15-year mortgage to a 30-year mortgage to save some money
< you want to change from a 30-year to a 15-year mortgage
< you would like to consolidate some debt that is at a higher rate (credit card, other loans, etc.) into your mortgage
< you want to skip a monthly payment during the next two or three months to pay down Christmas credit card bills (when you re-fi, you typically have a 45-day period of no payment. Interest is accruing, but the extra 60 days of no house payment can be a saving grace to pay off your Christmas bills DO NOT USE THIS "WINDFALL" MONEY for a disposable commodity (car, vacation, etc.) Use it on a bill of some sort.
< if you have 20% equity in your home and this is an opportunity to knock off the private mortgage insurance (PMI)
If you are a candidate to re-finance and haven't e-mailed me yet, e-mail me at Loans@TheMaherTeam.com. If you get a bounce-message, please re-send. Please don't get frustrated if you have to re-send a couple of times. This e-mail gets full pretty quickly and a lot of people are taking advantage of this opportunity. You'll be contacted promptly.
IN GENERAL! You should NOT re-finance if:
= you are currently in the low 5's for rate
= you are going to be moving within the next couple of years
= you are one of the lucky ones who has a mortgage (mostly investment property loans) that is based on prime
= your existing mortgage has a pre-payment penalty that the mortgage company won't waive (case-by-case basis)
= the value of your home is less than your mortgage (upside down in your house)
= you are in a hurry (the industry is in backlog, your refi is going to close in February most likely)
= (heavy sigh) you don't trust your mortgage person. I'm going to lay this out there and get some hate mail from lenders, but my loyalty is to my friends, family members, clientele, and people I know. This has been a rough year for the mortgage industry. Some unscrupulous individuals who miraculously survived to this point may see this as an opportunity to make a killing. Please call me before flipping the switch on a new loan. It can do devastating damage to your finances to be in the wrong home mortgage. We've seen the effects to the economy of bad loans.
There are exceptions to these rules.
A quick example to determine your break-even:
Current rate = 6% (a great rate!)
Re-fi rate (using Wells Fargo site) = 5%
Current Monthly Payment = $1199.10 (Note: I used the Mortgage Calculator at www.MichaelJMaher.com to calculate the payments. It's fill in the blank, easy, and automatic).
Refi Monthly Payment = $1073.64
Monthly Savings (rounded) = $125 Excellent!
Est. fees: $3000 (I can help you get less than this because of the volume of business we do)
Break-even: $3000/$125 = 24 months
* In this case, if you are planning on staying in your home for two years or greater, it is a wise decision to re-finance.
* Disclaimer: all these are estimates and your rate, fees, mortgage, and situation will differ based on your credit history, credit score, and other factors. I'm just here to help.
(1) I don't have a crystal ball to say the rates are never going lower, but I do know that there was a lot of downward pressure on the rates for the last two or three weeks and a lot of the mortgage companies typically "anticipate" the rates by lowering them before the public gets the news from the Fed. Mortgage-backed securities and bonds are still strong, but as money flows back to stocks pressure will push rates upwards. Also, Wednesday the national average rate was 5.06%, the lowest since 1971 and edged upward on Thursday and Friday (still solid at 5.18%). When I hear "historical low", I know that there will be tremendous mental and economic pressure to not dip below that. If we see jobs, consumer confidence, housing, and some of these other areas produce positive results we will have seen the lowest rate. I'm not an expert. I am a teacher and a helper. I do the research so I can teach and help. I've been wrong many times. I've been right more often than wrong.
So what do you do next?
If you are a candidate to re-finance and haven't e-mailed me yet, e-mail me at Loans@TheMaherTeam.com. If you get a bounce-message, please re-send. Please don't get frustrated if you have to re-send a couple of times. This e-mail gets full pretty quickly and a lot of people are taking advantage of this opportunity. We'll get back to you promptly and if that includes pointing you in the right direction for a lender, we'll do that as well. We have some we trust implicitly and they can sometimes even do reduced fees.
Finally, say a prayer for the economy. This rate reduction has been a big boost and many are taking advantage of it, but it's merely solving the symptoms. The problem is job growth and waste. As the jobs come back and the corporate world realizes how much money it wastes, the economy will rebound. And it WILL rebound. History and a lot of powerful people are on the economy's side.
I hope this article helped with your re-finance decision. You may ask why I am writing this. The first reason is because I've been asked a lot and now I have a guide to which I can refer them. The second reason is that this is a household decision and as your personal real estate consultant for life (that's my goal!), I want to help you with all things household. I want you to turn to me for help with anything around the home. When it comes to buying, selling, or investing, hopefully you will think about me. That's my goal. I'm here to help.
When I posted a similar note on Facebook.com, the response was immediate and impactful. After they contacted me and we placed them with a lender, the impact was over $10,000 in MONTHLY PAYMENTS for 56 PEOPLE! I love that! I'm helping. I'm making an impact. I did a good thing. Now is the time to have your mortgage reviewed. The average mortgage rate hit a historic low (5.06%) on Wednesday, December 17. They've creeped upwards over the last two days to 5.18%. Economic pressures indicate that it could continue to creep upwards. If it makes financial sense, please don't put it off. Please. Please e-mail me at Loans@TheMaherTeam.com