Comments on: BREAKING NEWS: if you haven’t refinanced yet, do so this week!

By: Honeycrisp

Honeycrisp — Wed, 02 Nov 2011 00:42:52 +0000

One more thing, Anon: the important aspect of all of this is that you are in choice. Whether or not the refi option makes sense for your specific situation, or whether you should switch products from an ARM to a fixed rate product, whatever the options are, the idea is that you CHOOSE. Too many people make their most significant purchase (their homes) and then go on autopilot. Turbulent, volatile times like these create opportunities for owners (or buyers) who don’t fall asleep at the wheel. Perhaps this isn’t the right time for you, but at least you conduct due diligence on your particular situation and actively decide you don’t want to take that step, rather than look in hind-sight and realize “I can’t believe I missed that window – I wish I had known …”

By: Honeycrisp

Honeycrisp — Wed, 02 Nov 2011 00:36:56 +0000

Again, all fantastic questions. We would say “yes”, contact your mortgage professional now. (Keep in mind that broker is different than banker, but that’s a longer discussion.) You MAY be able to lock in the rate quickly – that depends on your situation and the bank with which you’re working.

Indeed, if you live in a co-op, not only do you need to be approved but so does your building. But at least you’re getting the ball rolling.

As for the rate expectations – that’s always a hard call. As you know, for over 2 years now most people related to the industry have been screaming “rates will never be this low again” and “rates have nowhere to go but up” … and those are “screams” are legitimate … because rates, in general, are at historical lows when you look at multi-decade periods. And yet, rates have remained low, and getting lower. So, you’re always exposed to market timing risk. Always! The chances of catching the bottom on rates (or catching the peak on home prices to sell) are very very slim.

The point is that if your rate is in the high 4%’s or low 5%’s, you would do yourself a service to refinance, do a CEMA or a mere rate modification by calling your lender. As you know, markets are rarely 100% efficient, especially in the short term. Considering the “blow-up” of Greece, the market is likely in a position to over-react over the next week, which means rates will be impacted and owners can benefit. There is ALWAYS the possibility that we are headed towards a global double dip and that macro economic factors will warrant even lower US interest rates. AND, there’s a possibility that we do, in fact, experience a sustained global recovery, albeit an anemic one.

The question to ask yourself is (and forgive me for the academic bent) does your decision have a positive NPV (net present value). In other words, is the cost of whatever refinancing you undertake pay for itself? If you have a 30-year mortgage and your monthly payments are $5,000, and whatever maneuver you choose would cost you $10k total but would save you $500/month (again, just using round numbers to prove the point), then the cost of the decision would be paid off in 20 months, and then your remaining 28 years would greatly benefit for the savings.
Is this helpful?

By: Anon

Anon — Tue, 01 Nov 2011 23:54:20 +0000

Thanks for the quick reply! If I want to refi, should I contact my banker now? Am I going to be able to lock in the rate this week? I live in a coop and I think the procedure can be slow and onerous. In addition, what if the rate doesn’t go down as expected?

By: Honeycrisp

Honeycrisp — Tue, 01 Nov 2011 23:11:46 +0000

Great question. We should have qualified “agency” jumbo (in other words, a $625,500 loan size) for the current 4%. But the whole yield curve is shifting.
For example, super jumbo rates (between $3.5mm and under $10mm) currently are:
15/15 3.83%
3/1 ARM 2.30%
5/1 ARM 3.13%
7/1 ARM 3.5%
That’s no joke. The point is less about any one lender’s rates per se but the significant move that will likely continue to the week’s end … AND the call to refinance. Already, four of our clients to whom we sent this post are working to refinance precisely because of the potentially time-sensitive nature of this shift.

By: Anon

Anon — Tue, 01 Nov 2011 23:01:44 +0000

I just checked Wells Fargo Mortgage Rates (https://www.wellsfargo.com/mortgage/rates):

30-Year Fixed conforming is 4.125%
30-Year Fixed larger loan (jumbo) conforming is 4.375%
30-Year Fixed jumbo is 4.625%

APR is even higher.

Where did you get “We’re talking jumbo conforming rates at 4% or below”?