24/7 Wall St.

Mortgage rates are back under 4.50%.  If you just read the headline economic data coming out right now, inflation is on the rise.  The good news is that oil, metals, and other commodities which make up the biggest components of inflation have come back down.  This is happening as the economy is slowing and the outlook for jobs is mixed.  The good news is that all of this is culminating to create the perfect storm in the mortgage markets for qualified borrowers. We are urging our readers to consider one thing today.  Right now could be your last chance to ever to refinance your home mortgage under 4.50%.

This is no sales pitch nor an advertisement.  This is a call to arms!  24/7 Wall St. often looks at many economic situations with the eye of “What is best for America?” in mind.  Your chance to refinance is back.  At a minimum, this needs to be looked into soon.

If you did not refinance your mortgage in 2010 and you feel like you missed the boat, you need to call your mortgage broker or you need to go find one now.  The programs that are available for a refinance are of course going to depend upon all the same mortgage hurdles that were there before the recession (and then some). That is the same for new home buyers.  Buying a home simply because of a low mortgage rate is not a good idea.  But refinancing a mortgage if you can and if you plan to stay in your home for several years is something that you owe yourself to look into now.

Before going further, I have a personal example that is urging this call to arms.  Last year my wife and I went through the refinancing process.  It was not without pain.  We were in our home for more than three years at the time and the plan was to stay in the house for several more years.  Our own situation going into the refinance was one where we had a first fixed-rate mortgage slightly above 6.00%, and then we had a pricey second mortgage to avoid the PMI with a higher rate.

When we talked to our mortgage broker, we discovered that it was going to cost more than just a pretty penny to refinance.  We had to buy down some of our principal to make it work.  Without going into detail, it was thousands of dollars; and it was thousands of dollars more than what we thought it would be considering that we already owned the house (or the bank did).

After the immediate sticker shock, we revisited the situation and did the math on our own.  We immediately saw that we would have been idiots not to refinance at the record low rates.  Without going into too many details, the result was that we could lower our mortgage payments almost 30% by refinancing into a single 30-year mortgage.  We could have even opted to basically keep the payments at almost the same rate as before if we went for a 15-year fixed mortgage.

If we want to achieve the 15-year result, we can always double-down on a payment each year.  Now we have only one 30-year mortgage at a rate of 4.20%.  We did not catch the exact bottom of the interest rate cycle, but it was more than close enough.  The personal savings from this refinance came to literally thousands of dollars a year.

Now, forget about my personal story.  This is really about you.  Back in February the 30-year Treasury’s Long Bond was challenging 4.80% and it really looked like we’d be facing a 5.0% long bond yield again.  Meanwhile, the 10-Year Treasury was  near 3.75%.  When we refinanced last year the 10-Year Treasury yield was close to 2.50% and the 30-year was yielding around 3.75%.  Now, we have the 10-Year yield back down to about 3.10% and the 30-Year back down to under 4.25%.  The economic recovery has since slowed and the housing market has not recovered and doesn’t look like it will be any time soon.  The leading inflationary indicators (commodity prices) have eased a bit and rates have backed off.

It is still hard to imagine that Treasury yields will get back to those prior lows. What happened to all that hyperinflation that was coming?  QE2 is close to ending and that is supposed to take the cap off the interest rates.  All that newly printed  paper money, the sudden demand for hard assets rather than paper money, the meltdown of the U.S. Dollar, the endless borrowing of money by Uncle Sam, and many more factors were supposed to drive interest rates higher and higher.  Yet here we are with rates lower as European PIIGS nations are being roasted once again and as China and India have opted to fight inflation at the expense of economic growth.  Maybe the low rates last, maybe not.

We have looked all over the web now and the mortgage rates are coming back down to within striking distance of those 2010 lows in mortgage rates if you can qualify.  If your credit is solid, you can now get back under the 4.50% mortgage rate on a 30-year conventional mortgage.  Our opinion is that these mortgage rates are not likely to drop as much as Treasury rates if the interest rate cycle continues even lower again.

Getting a mortgage at 4.50% is not the same as 4.10% nor the same as 4.20%.  Still, how many times in your life have you been able to secure a rate this low?  The answer is twice, the first being last year.  You have to decide for yourself if the cost and savings will justify the hassle and cost of refinancing a mortgage.  If you have a first and second mortgage, the odds are in your favor that a refinancing can pay off with major savings.  If you have just a primary mortgage with a rate slightly above 5% then a refinance may be a toss-up.  For many borrowers, the market gods are back to giving you a second or third chance to refinance and save serious money on your monthly living expenses.

Is today the lowest that rates will go? Doubtful. Picking a true low is nearly impossible.  When you get a chance to revisit a lost savings opportunity like this then not even looking into it is almost as bad as burning money.  It will cost you nothing to look online or even to call a real person who is a mortgage broker.  This is a call to arms!  You owe it to yourself to at least try. Your savings could be massive.

JON C. OGG