so now that the fed has cut rates...should I remortgage?
#1
so now that the fed has cut rates...should I remortgage?
AS per title, is it worthwhile to call the bank or is .75% not enough to consider, based on the fees etc.?
Cheers,
C
Cheers,
C
#3
Mr. Grumpy
Joined: Jun 2003
Location: Nashville, TN
Posts: 3,100
Re: so now that the fed has cut rates...should I remortgage?
#4
Re: so now that the fed has cut rates...should I remortgage?
A broker explained it to me that mortgage rates are tied to long-term bond rates, and that L-T bond rates don't always follow what the Fed does ... anyone shed any light?
#5
Re: so now that the fed has cut rates...should I remortgage?
Talking to a friend who was a mortgage broker, and this is a real generalisation, you'd need to sit down with a calculator:
You need to know what your current interest rate is you are paying now, and see what interest rate you can get.
Bear in mind there are fees involved with re-financing, so the difference in th two would need to be a percentage point to make it worth it.
You need to know what your current interest rate is you are paying now, and see what interest rate you can get.
Bear in mind there are fees involved with re-financing, so the difference in th two would need to be a percentage point to make it worth it.
#6
Re: so now that the fed has cut rates...should I remortgage?
Talking to a friend who was a mortgage broker, and this is a real generalisation, you'd need to sit down with a calculator:
You need to know what your current interest rate is you are paying now, and see what interest rate you can get.
Bear in mind there are fees involved with re-financing, so the difference in th two would need to be a percentage point to make it worth it.
You need to know what your current interest rate is you are paying now, and see what interest rate you can get.
Bear in mind there are fees involved with re-financing, so the difference in th two would need to be a percentage point to make it worth it.
It never ceases to amaze me how many people here in the UK tie into fixed rate deals and refinance every 2-5 years, and think nothing of the fact they can pay mortgage arrangement fees in the hundreds, or even thousands ... if the mortgage company allows them to roll the fees into the loan amount, it's almost as if they don't exist.
#7
Re: so now that the fed has cut rates...should I remortgage?
Really, it also depends on how long you keep the "new" mortgage. Especially if you get a long-term fixed-rate deal (which you can in the US), over the life of a mortgage, a difference of a half a point could add up. On a 200k mortgage, that's a difference of about 1,000 a year interest ... not counting the fact that the interest decreases over time, of course.
It never ceases to amaze me how many people here in the UK tie into fixed rate deals and refinance every 2-5 years, and think nothing of the fact they can pay mortgage arrangement fees in the hundreds, or even thousands ... if the mortgage company allows them to roll the fees into the loan amount, it's almost as if they don't exist.
It never ceases to amaze me how many people here in the UK tie into fixed rate deals and refinance every 2-5 years, and think nothing of the fact they can pay mortgage arrangement fees in the hundreds, or even thousands ... if the mortgage company allows them to roll the fees into the loan amount, it's almost as if they don't exist.
#8
Re: so now that the fed has cut rates...should I remortgage?
my morgage broker said to us that it would have to be AT LEAST ahalf point drop in the mortgage rate to make it worth it.
#10
Re: so now that the fed has cut rates...should I remortgage?
A spreadsheet is your friend in trying to get your head around these things.
You can easily project savings/costs over 5 10 15 etc years and easily see what difference various percentages make and also factor in the fees aswell.
Helped me know end in choosing my last mortgage.
You can easily project savings/costs over 5 10 15 etc years and easily see what difference various percentages make and also factor in the fees aswell.
Helped me know end in choosing my last mortgage.
#13
Mr. Grumpy
Joined: Jun 2003
Location: Nashville, TN
Posts: 3,100
Re: so now that the fed has cut rates...should I remortgage?
mortgages unfortunately were not at these levels
the notes i get are tied to the 10-year treasury yield and they have gone down from just over 7.5% down to 6.6% currently so it makes things a lot easier for some real estate investors
#14
Re: so now that the fed has cut rates...should I remortgage?
Your mortgage broker sees fees! It may or may not be worth it. Do the calculations yourself!
#15
Bloody Yank
Joined: Oct 2005
Location: USA! USA!
Posts: 4,186
Re: so now that the fed has cut rates...should I remortgage?
In this case, the spread represents what investors want to earn above the base rate, and that spread can change over time. With capital flight, spreads tend to increase, because there are fewer dollars (or pounds or whatever) chasing deals, decreasing the supply of money available for investments. This is also usually accompanied by a "flight to quality," in which marginal investments that would have once attracted capital are avoided, because there are better deals out there than there were before.
The most immediate benefit vis-a-vis these rates cuts will probably be for "conforming" loans (those under $417k) because these can be purchased by Fannie Mae and Freddie Mac. Those who need "jumbo" loans may have to wait longer. In some parts of the country, Fannie and Freddie play a much lesser role in the market because home prices are too high to be served by conforming loans.
As for the OP, it's hard to answer your question without more information. But here's a basic mistake that most people forget when refinancing -- you are most likely extending your term.
Let's say that you obtained a loan with a 30-year term. You've had the loan for two years, so you now have 28 years remaining. If you refi it now with a 30-year loan, you may end up with a lower monthly payment, but you will end up with 24 more of them. And because you will have fees rolled into the new loan, plus changed your amortization, you may be very well increasing the proportion of your payment that is going to pay interest, and reducing the amount that is going to principal.
I think that the hidden story behind the latest mortgage crisis is that a lot of borrowers who were caught up in it were not "subprime" borrowers, but were better "non prime" and even some "prime" borrowers who buried themselves in constant refinancing. Between this and home equity loans, these people cashed in on their previous equity, which set them up for being underwater today, when they could have ridden this out had they just left well enough alone.
If you can afford it, one thing to consider is finding a way to swap your 30-year loan for a new 25-year or 15-year. Not only will you pay it off more quickly, but you should be able to get a lower interest rate, because shorter maturities should save you money. A 15-year loan should provide a rate that is roughly 50 bp (0.5%) lower than a comparable 30-year loan. The disadvantage is that because you pay less interest, you will have less to deduct for tax purposes, but you will gain the benefit of 180 fewer payments.
Most loan brokers are one step above car salesmen, ignore their pitching for constant refinancing. The rate is important, but it isn't just about the rate, but the whole package.
Last edited by RoadWarriorFromLP; Jan 23rd 2008 at 3:30 pm.