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There is a tremendous amount of discussion in the news and media regarding the interest rate will be three years lows and now has to be a good time for homeowners to refinance into 30 year fixed interest rate. It's no secret that marketing scaring the crap out of the consumer is pretty useful sales tactic. People buy on emotion and make emotional decisions and the media and advertisers to sell products in this way.
I have been pounding the table since May 2007 that the Fed will lower rates to begin in fall 2007, you can see my blog post on the interest rate will be lower and look for topics by May 2007. So, this big whoop la comes as no surprise. What must be understood is that the mortgage just like any investment should be managed. Just like the investment, the various loan products "perform" better during certain periods and working with certified mortgage planner allows users to take advantage of changes in market conditions and feelings, and save $ 10 a thousand dollars.
Management of the mortgage is not about getting the lowest interest rate. It's about matching a mortgage to a client financial goals. When you match the mortgage to your financial goals stvar.Kredit prices do not have a program that is meeting certain financial needs of the borrower.
This part of the creation of wealth can not explain to clients. In this job I meet many people who have achieved great wealth of harmonization of their mortgage (s) for their financial needs. I've never met one who achieved great wealth, they received the lowest mortgage rates.
It's my job as a certified mortgage professional to help borrowers make smart choices in selecting and maintaining a home loan. So to answer the question, should a homeowner with an adjustable rate refinance for a fixed mortgage rate? In broad and general sense, absolutely not! Many people are going to be enticed to refinance into long term fixed rates. If the only reason someone is refinancing is to provide "lower rate", then save your money.
Let's look at just two popular adjustable loan programs and the important points.
MTA Index credits (option arm)
MTA Index lagged the index, which means it has footage of the last 12 months CMT or Constant Maturity Treasury. Currently MTA index is down 4.522% from 5.0142% in February 2007. More importantly, CMT, is 2.19%. So, over the next 12 months those with MTA loans have rates based on 2.19%, a full 2.33% lower than the current 4.522 %.
1 - Month LIBOR Index loans
for those with U.S. denominated 1MO LIBOR (London Interbank Offered Rate) loans to other popular index for adjustable loans, currently trading at 3.285% down from 5.3% in January last year, more than 2%.
Well it would not be in the best interest of everyone just for refinancing rate. If you were to refinance for a life goal, or college or retirement planning, it is a completely different topic. There is so much money to lose with consumers refinance just to reduce their rates and 80% of the time are adding years to their mortgage. So what is the real savings? Did you add 3, 5 or more years to save several hundred dollars a month? There is no advice, bad advice and hobby lose 10 many thousands maybe even hundreds of thousands of . It's really a shame some consumers do not spend more time investigating the mortgage on the advice of experts.
Alan Greenspan has taken a lot of criticism if the statement was recently issued a recommendation back to the house in 2004, you should have an adjustable rate mortgage. Greenspan said the "safety of fixed-rate mortgage May not be worth the price. In rare option pricing interest rate that households face, on the question of whether American homeowners are well served by popular fixed-rate mortgage ."
His point can best be explained this way. I have a chart that I show up to all my clients. This chart shows the last 210 years, to 210 years, back in 1790, Treasury bonds and that this table shows that for 185 of the last 210 years, is below 7.5%. I can not publish a table here for copy write reasons.
If you look at a chart of interest rates by the age of Reaganomics, the prices are gritty and consistent decline. After high 18.25% in January 1982, they went up to 7% range until 1990. Interest rates consolidated in 7% -8% range until 2000. Between the years 2000 - 2005 continued decline in the low 4.5% - 5%. From 2005 - 2007 went up 6.5%, and again in January 2008 continued the trend down again
.
We were refinancing loan at 4.5%, and borrowers to provide us with rates will never again be this low. How wrong!
But the point of the Reagan era, and now consumers will be best served in a 30 year fixed rate loan? You would always be better at an adjustable rate loan, for the past 25 years. Even if you have an adjustable time Reagan years and pay 14% -16%, prices are relative. Regardless of the mortgage rate of pay, it's pretty easy to get to other accounts, interest rates, which means that they received 14% - 16% in a fairly conservative savings accounts, certificates of deposit, etc. See how easy it is to get 5% guaranteed rate today.
must understand the why behind the high rate of 1980th Once you understand why, we can say with certainty that we will see a pretty good double-digit interest rates again. Our economy, monetary policy and foreign policy are much different than back in the Carter -. Reagan years
There is a tremendous amount of discussion in the news and media regarding the interest rate will be three years lows and now has to be a good time for homeowners to refinance into 30 year fixed interest rate. It's no secret that marketing scaring the crap out of the consumer is pretty useful sales tactic. People buy on emotion and make emotional decisions and the media and advertisers to sell products in this way.
I have been pounding the table since May 2006 that the Fed will lower rates to begin in fall 2007, you can see my blog post lower interest rates and search for topics by May 2007. So, this big whoop la comes as no surprise.
What you need to understand is that the mortgage is just like any investment should be managed. Just like the investment, the various loan products "perform" better during certain periods and working with certified mortgage planner allows users to take advantage of changes in market conditions and feelings, and save $ 10 a thousand dollars.
Management of the mortgage is not about getting the lowest interest rate. It's about matching a mortgage to a client financial goals. When you match the mortgage to your financial goals stvar.Kredit prices do not have a program that is meeting certain financial needs of the borrower.
This part of the creation of wealth can not explain to clients. In this job I meet many people who have achieved great wealth of harmonization of their mortgage (s) for their financial needs. I've never met one who achieved great wealth, they received the lowest mortgage rates.
It's my job as a certified mortgage professional to help borrowers make smart choices in selecting and maintaining a home loan. So to answer the question, should a homeowner with an adjustable rate refinance at a fixed interest rate? In broad and general sense, absolutely not! Many people are going to be enticed to refinance into long term fixed rates. If the only reason someone is refinancing is to provide "a lower mortgage rate," and then save your money.
Let's look at just two popular adjustable loan programs and the important points.
MTA Index credits (option arm)
MTA Index lagged the index, which means it has footage of the last 12 months CMT or Constant Maturity Treasury. Currently MTA index is down 4.522% from 5.0142% in February 2007. More importantly, CMT, is 2.19%. So, over the next 12 months those with MTA loans have rates based on 2.19%, a full 2.33% lower than the current 4.522 %.
1 - Month LIBOR Index loans
for those with U.S. denominated 1MO LIBOR (London Interbank Offered Rate) loans to other popular index for adjustable loans, currently trading at 3.285% down from 5.3% in January last year, more than 2%.
** Each index is different, and not perform the same. No fewer than ten different indices to adjust the loan. So if you have any questions regarding your specific situation and how the current rate environment affects your credit, please give us a call.
Why on earth should you refinance now at a fixed interest rate? Any mortgage professional, financial advisor, or we hope not, but .... neighbors or friends tell you not going to lower rates, their fire. They have no idea what they are doing. Interest rates simply do not go north any time soon and continue to decline.
Alan Greenspan has taken a lot of criticism if the statement was recently issued a recommendation back to the house in 2004, you should have an adjustable rate mortgage. Greenspan said the "safety of fixed-rate mortgage May not be worth the price. In rare option pricing interest rate that households face, on the question of whether American homeowners are well served by popular fixed-rate mortgage ."
His point can best be explained this way. I have a chart that I show up to all my clients. This chart shows the last 210 years, to 210 years, back in 1790, Treasury bonds and that this table shows that for 185 of the last 210 years, mortgage rates are lower by 7.5%. I can not publish a table here for copy write reasons, but will show a chart from 1977 to April 2007. If you want to see 210 years chart just call our office at 804.282.8808 and leave a message at ext 203 and we will mail, first class copy.
If you look at a chart of interest rates by the age of Reaganomics, the prices are gritty and consistent decline. After a high 17.5% in January 1982, they went up to 7% range until 1990. Interest rates consolidated in 7% -8% range until 2000. Between the years 2000 - 2005 continued decline in the low 4.5% - 5%. From 2005 - 2007 went up 6.5% and again in 2008, continuing a trend downward again
.
We were refinancing loan at 4.5%, and borrowers to provide us with rates will never again be this low. How wrong!
But the point of the Reagan era, and now consumers will be best served in a 30 year fixed rate loan? Never. You would always be better at an adjustable rate loan, for the past 25 years. Even if you have an adjustable time Reagan years and pay 14% -16%, prices are relative. Regardless of the mortgage rate of pay, it's pretty easy to get to other accounts, interest rates, which means that they received 14% - 16% in a fairly conservative savings accounts, certificates of deposit, etc. See how easy it is to get 5% guaranteed rate today.
must understand the why behind the high rate of 1980th Once you understand why, we can say with certainty that we will see a pretty good double-digit interest rates again. Our economy, monetary policy and foreign policy are much different than back in the Carter -. Reagan years
Bottom Line: mortgages must be tied to its long and short term goals. Whether buying or refinancing, the mortgage must strategically consider those of any financial plan to be for life. If you refinance correlates with a specific purpose, then now would be a good time to look at your options. But if it is only at lower rates than they probably would not be beneficial.