Attention! Now is the time to refinance in America. Mortgage rates are at ALL-TIME lows in 2020 thanks to the coronavirus market meltdown. We must all refinance now. You can save significantly on each monthly mortgage payment with rates this low.

Check out Credible, my favorite mortgage marketplace where prequalified lenders compete for your business. You can get competitive, real mortgage rate quotes in under three minutes for free.

US mortgage rates are down to all-time lows! When banks compete for your refinance in America, you win.

Refinance In America Today

I’m on a mission to help encourage as many people to refinance in American as possible. I get nothing in return, just the satisfaction of trying to help others save money.

Lots of people have mortgages, but most people are not a rate hawk like me. Thus, I’m here to give you a nice kick in the pants to save some money every month for the next 5-to-30 years of your life. 

Nobody gave me a kick in the pants when I locked in my refi. Which is why I had to pay 0.125% higher than I should have. I was unsure and waited a little too long.

Banks have promotions all the time. Your duty as a borrower and saver is to identify which banks are offering the most attractive terms at any given moment. 

I’ve had great results with Citibank and Wells Fargo. They’ve had mortgage rates often 50 basis points (0.5%) cheaper than other competitors for 5/1 and 30-year mortgage products. 

Citibank and Wells Fargo on a rampage to build up their loan book again.  As patriots, it’s our duty to spread the word and make sure we don’t fall off a cliff again!

The Biggest Hurdle To Refinance In America

I’ve spoken to several people who are having a difficult time refinancing simple due to the LTV loan-to-value ratio of their house. For those who don’t know, banks generally have a maximum LTV now of 80%. 

In other words, if you have a house worth $1 million dollars, you can not borrow more than $800,000 ($800,000 / $1,000,000 = 80%). 

A LTV of greater than 80% is viewed as too risky in this more conservative day and age. Banks may still lend you money to refinance in America, but at a much higher rate than you may like.

Many areas of the US have experienced over 13 consecutive months of year over year increases in housing, but values are easily 10-20% lower than the peak. 

In the example above, your loan to value percent rises to 100% if your house value falls 20%. This is because a mortgage of $800,000 equals the value of your house. In this scenario, what are you going to do to take advantage of these blockbuster low interest rates?

Lower Your LTV Ratio And Refinance

If you love your home, and plan on staying in it for a long time you may simply want to pay down your mortgage to make your LTV 80% or lower again.

Here’s a great example I modified from a WSJ article highlighting the trend of putting more cash in your home:

• Value of Home: $910,000 from $1,100,000 just a couple years ago.
• Current loan balance: $809,000 (on a 30-year fixed mortgage at 6%)
• Loan-to-value = $809,000 / $910,000 = 89% = too high!
• Current monthly payment: $6,398
• Cash paid at closing to retire current loan: $80,000
• New loan terms: $729,000, 15-year fixed mortgage at 4.375%
• Updated loan-to-value = $729,000 / $910,000 = 80% = compliant!
• Lower new monthly payment: $5,530
• Monthly payment savings: $868 per month ($6,398 – $5,530)
• Return on the $80,000 investment: $868 / $80,000 = 10.4% return annually for five years.*

*Includes both the principal paid down on the new, shorter-term loan and the monthly savings in loan payments.

I don’t know about you, but I would throw ALL my money at an investment that guarantees 10.4% annually a year. Ten percent returns is what Bernie Madoff promised, and he built a $50 billion empire! 

Hence, the key variable is whether you want to stay in your house for 10+ more years and whether you have the cash on hand ready to pay down your mortgage and refinance in America.

Key Takeaways

The fact that more people are injecting more cash into their homes tells me that people have become conservative with their finances. In addition, they and are looking for as close to sure things as possible. 

If you are tying up tens of thousands or more dollars in an illiquid asset, you’re also showing that you are more confident about your financial future.

It’s unfortunate that not everybody who owns a home can take advantage of current low rates without having to inject more cash. 

But, if you are adamant on taking advantage of the current low rate environment in the US, and plan to stay in your house indefinitely, then it behooves you to pay down that mortgage and increase your disposable income. 

Your budget will thank you in the long run, and America will thank you further!

Note: Hopefully many are able to take advantage of these rates because you’ve followed the 30/30/3 rule of home buying. With a 20% buffer, and an extra 10% in cash savings, you should be alright.

Wealth Building Recommendations

Explore real estate crowdfunding: If you’re looking to buy property as an investment or reinvest your house sale proceeds, take a look at Fundrise. They are one of the largest real estate crowdfunding platforms today.

Fundrise allows everyone to invest in mid-market commercial real estate deals across the country that were once only available to institutions or super high net worth individuals.

They are the pioneers of eREIT funds and are creating an Opportunity Fund to take advantage of tax-efficient Opportunity Zones.

Thanks to technology, it’s now much easier to take advantage of lower valuation, higher net rental yield properties across America.

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Updated for 2020 and beyond.

As a multiple property owner, I am constantly watching interest rates and the 10-year yield. A refinance opportunity has emerged yet again now that mortgage rates have declined. Has it been a while since you last refinanced your mortgage? Now is the time to check mortgage rates for free. See how much you could save.

Earlier this year I refinanced one of my rental properties. Fortunately, I locked in a 2.625% rate for a 5/1 conforming ARM. So I have another 4.5 years until my interest rate adjusts upwards or downwards.

My payment is roughly $2,800 a month – $1,350 of which goes to principal. I’m not too worried about rising rates down the road because the property generates $4,500 a month in rent.

30-year fixed rate mortgage or an adjustable rate mortgage? This is the question most homebuyers have when deciding on which mortgage to assume. For those wisely refinancing with interest rates at all-time lows, many more are wondering whether a 30-year fixed rate mortgage is still worth it. After taking out multiple mortgage types since 2003, my opinion is that getting an adjustable rate mortgage is cheaper and will save you more money over time.

One of the biggest secrets banks don’t want you to know is that they make more money off larger and longer duration loans because they can charge a higher mortgage interest rate.

Banks take advantage of fear of the unknown by selling borrowers peace of mind. There’s certainly value in knowing that over a 30-year period, your mortgage rate will never go up. However, there’s something bank also don’t want borrowers to know.

Interest rates have been coming down since the late 1980s as the Federal Reserve has become more efficient in managing economic cycles and the US has grown to the world standard for sovereign assets through the purchase of US treasury bonds.

From this simple chart, you will understand:

* The risk free rate of return

* Expectations on interest rates

* Expectations on inflation

* Borrowing/credit costs

* Risk aversion, or lack thereof

* The health of the world

That’s right. By understanding what the latest 10-year treasury means, you will be able to save a lot of money, potentially make a lot of money, and stop being so fearful of the future.

Borrowing on the long end is a suboptimal use of funds. The people who are pushing you into 30-year fixed loans: 1) Are not economics majors or bond traders, but journalists and/or 2) Have a vested interest in you borrowing as long as possible so they can make as much money off you as possible.

The higher the rate, the easier it is for them to earn a wider spread.

I dodged a bullet, Matrix style, and I didn’t even realize it until the coronavirus hit. The coronavirus pandemic has caused mortgage rates to drop once more as investors seek the safety of bonds.

Had I not refinanced my primary residence mortgage before I bought a larger house, I wouldn’t have been able to get my low rate or maybe even refinance at all.

Nowadays, banks are extremely stringent when issuing new mortgages or refinancing old ones. LIAR NINJA loans are gone. 0% down payments and negative amortization loans are also no more.

This lending stringency is one of the main reasons why I don’t believe the next housing bust will be as bad as the last one. The combination of massive housing equity gains plus high credit-worthy buyers since 2009 means that any correction will be modest.

Whenever the yield curve inverts, refinance your mortgage. Let me use a previous example as to why this is.

On March 11, 2019, Federal Reserve Chair Jerome Powell indicated there will be no further rate hikes in 2019, even though he suggested that two were likely this year as recently as December 2018. Then in August 2019, the Fed finally cut rates for the first time in 10 years.

A rate cut is welcome news for borrowers and investors. However, declining fixed income yields is also a sign of slowing growth. The Federal Reserve does not see the economy as strong enough to withstand higher interest rates.

It’s hard to accurately predict the future. The bond market is telling us one thing and the stock market is telling us another.

But when you’ve got a bird in the hand, don’t let go. Every homeowner should at the very least refinance their mortgage now and boost cash flow.