No “Starting Over”, Tim McLaughlin, VP Weichert Financial Services
In speaking with a couple of associates last night, the topic of refinancing came up. When analyzing a specific situation, the comment was made, “I would consider refinancing my home at today’s lower rates, but I am already X years into the loan, and I’m not sure I want to start all over again” (meaning they had paid down X years of their 30 year mortgage, and they didn’t want to start over again with a new 30 year mortgage).
To which I commented “then why not refinance into a 20 year or 25 year term loan so you don’t have to start over again”. In unison, two knowledgeable associates responded, “you can do that”?
Sometimes, we are so close to a situation, or an answer appears so commonplace, that we assume everyone knows the answer, but perhaps, we haven’t done as great of a job as we should have getting the news out. So with a slow news week, this gives us a great opportunity to get the message out for those who didn’t know, and reiterate the message for those that did:
on Fannie Mae and Freddie Mac loans (loans that are the vast majority of our refinance transactions), the following terms are available for Fixed Rate structures: 10 year, 15 year, 20 year, 25 year, and 30 years.
So there is no need to “start over”.
Everyone can take advantage of these historically rates and continue to maintain (or even reduce) the existing term of their loan without “starting over”. In fact, we have seen the majority of the refinance scenarios in 2011 be of the “trade-down” variety -> where an original 30 year term refinances into a new 15, 20 or 25 year term loan (at a lower price to reduce payment, a shorter term to reduce life of loan and future value interest paid, or both), or 15 year term loans refinance into 10 year term structures.
The prevailing thought is that interest rates will stay low for quite some time given the woes of the global financial markets and the economic climate, and that may be hard to debate. What is not hard to debate is with rates at this level, the downside (rates ticking back upwards) is significantly more likely than the upside (rates dropping down further), so why risk the chance of missing out on a great thing?
This is the weekend to capitalize…your trusted Weichert Financial Gold Services Manager can help you reduce your payment and/or your loan term this weekend in time for the coming holidays. We can help….ask us how!