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Mortgage Rates at 2.75%?
Yes! Refinance RIGHT NOW
Akwaaba (Welcome) G&G Readers,
"Asar, I just refinanced a guy at 2.75% on a 15-year mortgage," a mortgage-broker friend told me over the weekend. I knew we were at record-low mortgage rates… But 2.75%? Really?
Sign me up! (Seriously. I if a had a mortgage I would refinance at these record low rates.)
This … literally is free money… Seriously… This is money you have to take if you have a mortgage or are on the cusp of buying a home.
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Creative Financing in Full Swing
You see, the government is manipulating the mortgage market – in your favor. It won't last forever. Sure, rates can go lower… But, if I were a betting man, I'd lock in these rates right now why they are this low.
I say it's "free money" because, over the last 25 years, inflation has averaged just under 3%. Meanwhile, banks are refinancing mortgages for just under 3%. So, adjusted for inflation, I consider this "free money."
This is crazy. At the very least, banks need to earn more than the rate of inflation to turn a profit. But the thing is, the banks aren't keeping these loans…
Specifically, the Federal Reserve is trying to stimulate the economy. (This is a key part of the Bernanke Asset Bubble I've been telling you about.)
The other week, the Fed decided its preferred way of stimulating the economy is buying mortgages – and therefore, pushing mortgage rates down to record lows. For the last few weeks, the government has spent $20 billion a week buying mortgages. To me, the government buying mortgages is a bit ridiculous. But, you'd be crazy not to take advantage of it.
To give you an idea of just how low 2.75% is today, consider that four years ago, 15-year mortgage rates were over 6%. This ultra-low 2.75% rate isn't just reserved for people with perfect credit – it turns out the national average is 2.73%.
{Here's the proof:
http://research.stlouisfed.org/fred2/series/MORTGAGE15US?cid=114}
So, don't assume you won't qualify. You should find out and make sure. "Remember, you are guaranteed to get 100% of what you don't ask for."
Right now the banks are not trying to prevent you from getting a mortgage. Heck, the banks want to sell you a mortgage, because they can now easily turn around and sell it to the government.
Requirements to get a loan are pretty much the same as it has been in the past, and the down payment requirements are still very low, too. "For a couple percent down, you can get an FHA loan." FHA stands for the Federal Housing Administration. It has programs that allow people who wouldn't otherwise qualify to buy a home with a super-low down payment.
"For 5% down, you can get a 'traditional' mortgage." (By a "traditional" mortgage, that means a mortgage, under $417,000, with mortgage insurance.)
"But what about people who are underwater on their loans, you might ask?" Banks are even lending to them, as long as a person has verifiable monthly income that reasonably exceeds their debt service."
Here's how I look at it… Borrowing money in U.S. dollars and investing it in a real asset is exactly where I would want to be in this world of make believe paper currencies. In a sense, you're "shorting" the dollar and "going long" U.S. real estate.
At these artificially low rates – below the historical rate of inflation – you should consider a new mortgage if you can afford it. Whether it's buying a new house or refinancing your existing one.
Mortgage rates are at record-low levels and locking in a rate below 3% you are hard pressed to go wrong there … UNLESS … you buy more house than you need or can reasonably afford based on common sense debt to income analysis.
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Meda Ase p (Thank You Very Much),
Asar Maa Ra Gray
Tax & Financial Consultant, RFC
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LEGAL NOTICE: This work is based on what I've learned as a financial researcher and analyst based SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. It may contain errors and you should not base investment decisions solely on what you read here. It's your money and your responsibility. Nothing herein should be considered personalized investment advice.
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