By Mickey Carlton with Thomas Mortgage (one of the preferred vendors of ViewThisOrlandoHome.com)
As your trusted advisor, I want to make sure you get the facts on changes in the mortgage market. Here are answers to recently asked questions about mortgage interest rates:
How low did they go?
Wednesday morning (1/23) saw rates in the low 5% range. Yes, the Federal Reserve slashed interest rates. But the Fed move was REACTIVE. The Fed did not “cause” the rates to go lower. The Fed was reacting to the dramatic decline in stock prices and the belief that the economy might be tilting toward recession. The Fed does not set mortgage rates. Mortgage rates are set by "the market". The Fed lowered an overnight rate used by banks to borrow from each other. Mortgage rates fell because investors were selling stocks and moving to the perceived safety of bonds.
These prices only lasted a short time. Stocks rallied and the interest rates went up, as well. Currently, rates are hanging around in the mid 5% to the low 6% range (without discount points or origination fees).
How low do rates need to go to justify a refinance?
Depends on loan size, credit score, purpose of refinance and other variables. Lending rules have changed in significant fashion during the last six months. Refinances must be considered on a case-by-case basis. You may e-mail me at m.carlton@thomasmortgage.com for an individual loan analysis customized to your needs and circumstances.
Is a refinance worth the cost?
Depends. One has to do the arithmetic to determine how quickly the payment savings from a refinance will recover the closing costs. I do that on a daily basis and can help you with the computation. Clearly, you do not want to refinance if it will take two years to recover the cost and you think you might move in only a year or so.
What about a no-cost refinance? The guy on the radio said "no out-of-pocket costs".
No-cost refinances are simply an illusion. Someone has to pay the state taxes, recording fees, title insurance, etc. That someone is always the borrower in one form or another. Lenders who promise no cost refinances are either rolling the cost into the new loan amount or increasing the new rate enough to allow the lender to absorb the costs. Either way, the borrower pays the costs. Either of these techniques is acceptable and I can do them; I just won't mislead you and imply that it is not costing you anything. A claim of "no out-of-pocket costs" just means that the lender is rolling the costs into the new loan amount. Be wary of advertised claims. They can be deceptive. Call or e-mail me for an evaluation if something looks enticing.
Should I refinance out of my ARM loan?
Not necessarily. Rates are dropping. Your ARM might get cheaper. Call for specific comment.
Speaking of moving...
This is an excellent time to buy whether you are a first-time buyer or a “move-up” buyer. Perhaps it is time for a larger home or a home in a more desirable geographic location. Anyone considering a move should factor in today’s low rates. Contact me at 407-788-5100 or m.carlton@thomasmortgage.com for a discussion of the many other variables.
