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Seize the moment! The bond market has given us yet another opportunity to lock in lower interest rates. This recent trend has been the result of poor consumer confidence coupled with various other negative economic indicators, daily news of lower than expected corporate earnings reports and of course, our nation’s corporate thieves being lead away in handcuffs by the authorities. We have all been witness to a fundamental economic theory known as "a flight to quality.” Investors are pulling their money out of the equities markets at a rate that has driven down the Dow Jones Industrial Averages from a level of 9685 as of February 5th to its current level of 8565, as I write. It is important to note the Dow Jones had dipped below the 8000 level and has moved 100 points or more in 14 of the past 22 sessions. Those of our readers who are currently holding adjustable rate mortgages or indexed mortgages should consider refinancing or modifying their home loans to a fixed rate mortgage. The current 30-year fixed rate mortgage is at 5.875% and the 15-year is at 5.50%. Under these conditions you may be very comfortable with your payments, however, we all know that rates are subject to change. Adjustable and indexed mortgages feel it most when rates move up. Now is the time to "fix" your rate. Homeowners who have 30 year or longer terms should consider converting or modifying to a 15 year term or shorter. At rates like these you may be able to cut your term in half while making close to the same payment of principle and interest. For example, a loan amount of $200,000 at a rate of 8.25% would result in a payment of $1,502.65 per month. The same mortgage on a 15- year term at a current rate of 6.50% would result in a payment of $1643.17. In both situations, whether converting an ARM or Index to a fixed mortgage or shortening your term, consult your servicing agent and inquire as to the ability to modify your loan for a flat fee or at reduced closing costs. By going back to the original agent you should not have to pay mortgage tax a second time (paid at first closing). Mortgage tax in the five boroughs represents 1.75% of the loan amount minus $25.00. Therefore, on our example of $200,000 the mortgage tax would amount to $3,475.00. This could amount to substantial savings in closing costs. If modification is not possible, refinancing may be the answer. Shop your loan with various lenders and be sure to obtain a Good Faith Estimate which will disclose the cost of refinancing. A
quick reminder--- Home Equity Lines of Credit are still available
at Prime (4.25%) up to $500,000 with no closing costs, no add-ons
and no points. |
