Is There Another Re-Financing Frenzy Brewing?

Bob O'Brien
Head Instructor
bobrien@mywealth.com

Freddie Mac has stated that the 30 year mortgage is at record lows and fell to its lowest rate in 37 years. The rate has dropped to 5.19% from 6.14% a year ago.  According to bankrate.com, the average monthly rate is at 5.28%, and the record low for their 10 year index was 4.88%.  What is even more interesting is that the averages may not be telling the full story.   Some lenders are still a little frozen while others are ready to lend. There appears to be rates as low as 4.25% out there.   

1. Know your current rate… Generally, if you can reduce your rate by 1% it is worth you while to re-finance. This is due to the expenses associated with re-financing such as closing costs and pre-payment fees.
2. Stay away from gimmicky mortages…. And if you are in one of those “teaser rate” loans, this may be your opportunity to get out.
3. Stay away from mortgage brokers… Generally their lending practices are questionable, and their rates are usually a point higher than going directly to the lender.
4. Do your home work and run the numbers yourself… Many people have really been mislead in recent years, and you need to make certain you are looking after yourself by researching and running the calculations yourself.  In our courses, we are always helping people run the #’s themselves.
5. Be smart if you take cash out... because the party is over! If you have high interest debt, such as credit cards and you can re-finance and take cash out… realize that the equity you are taking out of your home is real and needs to be protected.  I would urge you to take our Financial Planning course where we have helped a lot of people manage their budget better.