Evan Swanson from Guild Mortgage explains that even though the Federal Reserve cut interest rates on September 18th, mortgage rates have actually gone up a bit. This is because the mortgage market expected the rate cut and adjusted beforehand. Historically, mortgage rates often rise after the Fed cuts rates, but there’s hope that they will eventually go down.
Tag: Federal Reserve Board
Federal Reserve Board sets up new website on refinancing
The Federal Reserve Board recently created this website which is designed to help consumers evaluate whether or a refinance of their existing mortgage makes sense. Typically I am skeptical of the Federal Governments ability to simplify this process for consumers. After all they were the ones who brought us the Good Faith Estimate & Truth in Lending disclosure forms as a way of “simplifying” the home loan process. I think we can all agree that these two disclosure forms are anything but simple for consumers.
But I will admit that this website does have some good information presented in an easy to read format. I do take issue with a couple of the comments made on the site:
-The break-even worksheet on the site does not account for changes in amortization schedules between the existing and new mortgage in determining the break-even period. This means the result will favor refinancing more often than not because an existing mortgage will typically have greater principal to be paid in the near-term compared to new mortgage.
-The site also states, “Many financial advisers caution against cash-out refinancing to pay down unsecured debt (such as credit cards) or short-term secured debt (such as car loans).” When done properly using idle equity in a person’s home to pay-off unsecured debt can free up significant cash-flow to use towards savings and investment goals. I don’t know too many financial advisors who believe that is an adverse plan.
Overall the site is pretty good but I still think its most important for an individual to clearly establish their objectives for refinancing before making an ultimate decision. Here is a blog I posted about the subject a while back.
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