Last week, there was a 20% surge in mortgage activity driven primarily by refinancing activity from record low rates. The mortgage banker’s association said seasonally adjust refinances were up 26% while home purchase loan activity was up 10%.
While I tend to be skeptical of reports indicating the economy is improving/growing given all the negative news and sentiment (ya know, Europe imploding, 45 million Americans on foodstamps and continued layoffs), evidently, the low-rate policy that has been killing income investors is certainly rewarding to borrowers.
Rates are at historical lows below 4% on a 30-year and approaching 3% on a 15-year (mortgage rate table for your area) and with people looking to preserve cash and shore up their finances, a no-cost refinance is starting to make a lot of sense to people where they can close without any out of pocket expenses while realizing lower monthly payments from their refi.
Am I Missing Out?
I’m not a proponent of just going out and buying a home because rates are low. After all, home prices could fall further and saving $100 a month pales in comparison to closing costs and capital losses. However, if you CAN refi and you haven’t, it’s something to seriously consider. I also took advantage of the low rates recently and closed on a set of college campus houses with a partner. We had to get a commercial loan at a higher rate, but apparently our 5.5% is way better than the 7% or so commercial loans were fetching just a year or two earlier.
I wrote a post recently on no-cost refinancing which I’ve been heavily considering since I don’t want to blow another $4,000 on yet ANOTHER refinance, but for me, it only makes sense to go down to a 15 year from my 30. I don’t want to extend my loan out again now that I’m a few years into my 30. However, even with the 3.5% or so I could get on a 15 year WITH the lender paying all my closing costs, our monthly payments would be higher by a few hundred bucks so I have to convince the wife it’s worth it.
I guess between personal home purchases, refis and investment properties, there are plenty of avenues to take advantage of the low rates. The question is whether you’re missing the boat.
Are You Benefiting from Low Rates?