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You've heard of the "refi boom" of 2001. Well, get ready for what could shape up to be the "re-refi" boom of 2001.
With mortgage rates sliding below 7 percent, the economy in serious slowdown mode, and the Fed poised to push down short-term interest rates once again tomorrow, the stars are aligned.
Break out your calculator and your monthly mortgage statements. Phone your mortgage broker or friendly loan officer. And get ready to refi -- again.
Depending upon how low rates go -- and some aggressive lenders already are offering 30-year money well below 7 percent -- you may find it advantageous to refinance, even if you've already got a home loan in the mid to low 7's.
Economists at the nation's largest source of mortgage money agree that the latest round of rate slides will give an energetic boost to refinancings. Fannie Mae economist Orawin Velz says "we thought it (the refi boom) was pretty much dead" late this summer, compared to the land-office refi volume lenders racked up earlier in the year.
"But now," she says, " a lot more people may want to take advantage" of the newest down-cycle--even if they only net relatively small savings per month, factoring in the costs of the refi transaction.
"People have lots of other motivations today--they want to buy cars and other consumer goods. So I wouldn't be surprised" if refi volume jumped up again in a short burst in the coming few weeks, Velz says.
Ms. Velz herself, however, will not be refinancing this go-round. She already has a 6 3/8 percent fixed-rate 30-year mortgage on her home. But for ordinary folks with loans in the upper 7 percent and low 8 percent range, the opportunities this Fall to pull out some cash and lower their rates could be powerful.
Velz says the most immediate impacts of declining Treasury rates and a possible Fed cut will be in adjustable-rate mortgages (ARMs), especially hybrid loans that give you a low, short-term rate for 3 to 5 years, then convert to a fixed-rate loan.
But other significant opportunities for re-refinancing will exist through "no closing cost" transactions, where settlement and brokerage fees are included in the interest rate. The higher your current rate above 7 percent, the greater the potential advantages to you of re-refinancing in the weeks immediately ahead.
Say you've now got a 7 1/2 percent $300,000 fixed-rate mortgage. Your principal and interest monthly come to $2,097. If rates drop to 6 3/4 percent in the next week or two, you might be able to find a no-cost refi package at 7 percent, lowering your monthly out of pocket for principal and interest to $1,995.
The same broker or mortgage company could probably offer you an alternative no-cost refi for $325,000 at 7 percent, giving you $25,000 in your pocket tax-free, and a new monthly principal and interest payment of $2,161 -- just $64 over your current payment.
Now it's true that the 7 percent rate isn't the rock-bottom lowest you could have found by beating the bushes, paying closing costs and fees out of pocket.
But hey, all those fees are rolled into the 7 percent, and you've got 25 big ones in your wallet to spend, invest, or whatever you choose. So watch what happens to rates this week and next. Shop the Web and with brokers you know. If your credit history is good, and you've got plenty of equity in your home as a cushion, why not take advantage -- again?
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