Mortgage Blog

Interest rates have remained in a small trading window over the last 6+ months.  These historically low home refinance rates have helped many homeowners lower their monthly mortgage payments.  Most homeowners that are able to refinance will be looking at a rate between 4.5 and 5 percent.

So the question is how long will homeowners be able to take advantage of these low interest rates?  With the government spending and printing money inflation is all but guaranteed.  This means that interest rates will be going up, and they may be going up dramatically.  There is much talk about hyper-inflation and the possibilities of a depression.  The government has been able to keep rates low through a series of actions.  The problem with this, of course, is that when you artificially counter natural market conditions there will be a major correction at some point down the road.  I think everyone can see the writing on the wall.  The bottom line: refinance now, refinance long term and hunker down for a tough road ahead.  Mortgage refinancing may not be an option in the coming years.

The drastic swings of the stock market and the current state of the economy may soon have a serious effect on your home mortgage.  The credit markets are tightening and it is already becoming more difficult to obtain a mortgage for a purchase or a home refinance.  So how does the stock market effect your ability to obtain a mortgage and what can you do about it?

There are several factors at work here.  My first recommendation is to get out of your adjustable rate mortgage immediately.  Stop what you are doing and call your mortgage banker or broker to begin the refinance process immediately.  You cannot afford to risk the rate adjustment that is inevitably in your future.  So why do I say that you need to do this immediately?

The underwriting and qualifying guidelines are becoming increasingly tighter which can make it extremely difficult, if not impossible, to obtain a mortgage in the future.

The Economy and your ARM

Mortgage products are falling off the map daily and a 30 year fixed rate mortgage may be the only mortgage available in the coming months or years.  The spiral of home values and the falling economy are pushing the riskier mortgage products out of the market.  You may still have 2 or 3 years left on the fixed term of your adjustable rate mortgage, but you simply cannot afford to wait.  The implications of not being proactive could have huge implications on your financial stability moving forward.

Times are tough and they will probably get much tougher before they get better.  We have always been advocates of the refi your life idea and now that idea is becoming a neccessity for many Americans.  This is a great time to lower all of your monthly expenditures and eliminate unnecessary expenses.  Start with your mortgage.  That is the biggest asset in most folk’s lives.  Mortgage is probably the most volatile product in the credit markets today.  That is why it is imperative to get that taken care of before the impact on the credit markets expands any further.

A pre-payment penalty may be one of the most difficult decisions for a homeowner at this point in time.  Each homeowner will have to weigh the cost of the prepay against the risks in the mortgage refinance market.  If you can see the forest through the trees, it makes a lot of sense for most homeowners to take a deep breath and pay the penalty, especially if it means getting out of an adjustable rate mortgage.