Unprecedented times: opportunity!
I have never seen anything like the mix of factors we are seeing this summer. The combination of the Brexit vote, an unexpectedly strong U.S. jobs report, and strong retail sales has pushed the Dow to new heights while interest rates stay low.
In late June, the vote by UK citizens to leave the European Union rocked global stock markets and led to a drop in homeloan interest rates as nervous investors moved their funds to safer investments in bonds. In early July, the U.S. jobs report came in unexpectedly high, leading to greater investor confidence and a surge in the stock market. As I write this in mid-July, the June retail sales numbers are in, showing that Americans bought more cars and other goods and indicating that consumer confidence is up. In addition, China’s economy grew in the second quarter, lending a global push to stocks. The result is that the Dow has hit a new high.
Normally, I would expect the rise in the stock market to be balanced by an in- crease in mortgage rates as investors move their funds from bonds to stocks, but that hasn’t happened. Yet. That means that this summer may be your best opportunity to refinance your loan (or for some people to refi again) or buy a new home or investment property while rates are low.
MSN Money reported that some top money managers are not convinced that the stock and bond market rallies can last. They fear that buyers are ignoring the long term impact of Brexit. Furthermore, they predict a slowdown in global economic growth that may only be counterbalanced by stronger-than-expected corporate earnings, and none of them seem to be banking on that.
Your opportunity is here now. It’s time to review your current situation and consider these five strategies that may increase your net worth:
• Lower your rate and/or shorten your term to 20, 15 or 10 years. You may be able to save tens of thousands of dollars over the life of your loan.
• Take cash out for home renovations. Santa Fe homes have been appreciating in some areas over the last two or three years. You may have equity you can use to update your kitchen or create that spa bathroom. Or pay for the new roof or stucco. The monthly payment may be lower or similar.
• Consolidate debt. Use the refinance to pay off higher-rate credit cards or installment loans.
• Buy an investment property. Use a cash-out refi to get the funds for the down payment on a rental property.
• Trade up. Take advantage of these low rates to buy your dream home.
Even if you bought or refinanced your property last year, another refi could make sense. Right now we are seeing a high volume of repeat refis as clients take advantage of lower rates to move to shorter terms and/or lower rates, take cash out to buy an investment property, improve their homes, pay off debt, and in some cases even decrease or remove PMI (private mortgage insurance).
As always, talk to a mortgage professional and find out if a refi makes sense for you. In the future, we may be calling this the Summer of Refis!
Francis Phillips is senior mortgage-loan originator with First Choice Loan Services Inc. in Santa Fe. He has served as director of business development for national mortgage companies. He and his mortgage partners have funded and built three homes for Santa Fe Habitat for Humanity. Contact him at fran[email protected] or 505.982.3400.