| Refinancing: Don't Waste Time Wondering, Just Do It
If you're not changing the term of your loan ... even dropping your rate by an eighth makes sense because you did not have to change anything to get a loan," says Bob Walters, chief economist for Quicken Loans. "It always pays to get a lower rate." Say the current balance of your 6.5%, 30-year fixed mortgage is $250,000 and you are making monthly payments of $1,580. If you refinance into a loan of the same size that's one percentage point lower, 5.5%, you've dropped your monthly payments by about $160 to $1,420. But let's say you want to take out extra cash to pay off $20,000 in credit card debt: You'll need a new loan of $270,000. And even with that higher amount, your monthly payments are still reduced about $50 from your current payments to $1,533 a month. To determine how your monthly mortgage payments will differ under a new loan, use a mortgage-refinance calculator to determine the savings you might receive.
Great runners keep their eyes on the prize
If you sign something that allows you to live beyond your means for a few years, and seems too good to be true, in what sense are you not responsible for that decision? Last week on a local newscast, I heard a woman who had signed a gimmick loan, and now was in danger of losing her house, say, "The broker told me it was no problem because if interest rates went up, I could just refinance." We would not take seriously someone who said, "The broker told me it was no problem because if interest rates went up, I could find a bar of gold on the sidewalk." If interest rates went up, so would refinancing rates; the way to lock in a low mortgage rate was to buy only what you could afford and sign a conventional fixed loan. People who didn't do that, preferring a promise of something for nothing, are now complaining they should be bailed out.
Fed tries to rescue market
It would also lighten the burden on people with credit-card debt and adjustable-rate mortgages. Still, its effect on Wall Street wasn't overwhelmingly positive. The Standard & Poor's 500 index fell 14.69, or 1.11 percent, to 1,310.50, while the Nasdaq composite index lost 47.75, or 2.04 percent, to 2,292.27. The fact stocks didn't continue their steep plunge -- the Dow fell 277 points last Tuesday and 307 on Thursday -- was a positive sign, but economists and analysts said a full recovery wasn't likely in the near term. Frank Brooks, 62, who lives in the Harrods Creek area, said the market fluctuations of the past several weeks have been harrowing. A retired consultant, Brooks said he and his wife have about 60 percent of their savings in stocks, with the rest in certificates of deposit and other sources.
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