Life always seems smoother if you try to roll with the punches – and make lemonade out of lemons. Our firm believes strongly that the recent sell off in the equity markets is all but done, on about as much bad news as we have seen about COVID, especially in such a short time. But A good result from equity markets temporarily settling (we believe strongly it is only temporary) is that, once again, mortgage refinancing rates have dipped to near all-time lows. According to Credible, current mortgage finance rates are as follows:
30-year fixed rate 2.875%
20-year fixed rate 2.75%
15-year fixed rate 2.125%
10-year fixed 2.125%
For those of you who have not yet refinanced mortgages that are 3.5% or higher, we believe this is likely to be one of your very last chances to do so at rates which, 20 years from now, will be unbelievable.
For clients who are 50 plus years old, I would recommend going with a 15-year fixed rate, even if you could afford the higher payment on a 10-year, it is not worth paying a higher payment. Instead, if the bank is willing to accept a 2.125% rate (which, in all likelihood, will be dwarfed by inflation over the next 15 years) pay the lower loan rate and invest the difference! If your expected return is 10% per year and you are paying a tax deductible 2.125%, then the mortgage loan is essentially “free”, and you are building your net worth by increasing asset investments versus greater debt elimination.
That is truly making lemonade out of lemons!
*Full listing of all disclosures (bit.ly/3lGX3mM)
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