mark-ER

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Hey Peeps!

Well, lowest interest rates in history are upon us. Any good way to take advantage of this moment in history? I'd welcome feedback/discussion... I know this is a very knowledgable group!

My #1 option I think would be to refinance my house. The issue here is I already have a pretty good interest rate of 4.75% on an adjustable 7/23 ARM and will most likely move out and TRY to sell in less than 2 years. The key word here is TRY, because I live in Michigan and literally nothing is selling here. Another issue is it costs money and time to refinance; with less than 2 years to go it might not be worth it for me given the short time frame. On the other hand, I know there are government programs that are set up to help people with ARMs to refiance with low/no costs to avoid foreclosure. While I am in no risk for foreclosure, I will almost certainly loose money on selling my home and I hate spending most of my $$ on mortgage (certainly more than 40%), so I might qualify. Any of y'all know about these programs or direct me to somewhere I can educate myself, let me know.

Secondly, with near 0% interest rate, the dollar is about to go DOOOOWWNNN and will most likely lead to a period of way increased inflation in the 3-5% rate at least (versus current ~2%). Having lived through a period of hyperinflation abroad, I know what can happen in these situation; people save less, items go up in value (my parents sold their car for more than they paid for it new when they moved to the US). Anyway, since even moneymarkets are about to pay way less than inflation, what to do with your emergncy fund? (TIPS (treasury inflation protected securities)? intermediate bond fund)? Are you guys moving your dollars for Canadian dollars? Swiss Franks? A basket currency? An icelandic Krona ;) (?)

I hope this sparks a lively debate!!
 

Sol Rosenberg

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Unfortunately mortgage rates are not tied to the Federal Funds Rate (instead, they are indexed to the returns on certain mortgage-backed securities,) so rates haven't moved much over the past few months (the housing market certainly hasn't gotten LESS risky for lenders.) I just checked today out of curiousity, and the national average for a 30-year fixed, 20% down was something like 5.75%.
 

The White Coat Investor

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Hey Peeps!

Well, lowest interest rates in history are upon us. Any good way to take advantage of this moment in history? I'd welcome feedback/discussion... I know this is a very knowledgable group!

My #1 option I think would be to refinance my house. The issue here is I already have a pretty good interest rate of 4.75% on an adjustable 7/23 ARM and will most likely move out and TRY to sell in less than 2 years. The key word here is TRY, because I live in Michigan and literally nothing is selling here. Another issue is it costs money and time to refinance; with less than 2 years to go it might not be worth it for me given the short time frame. On the other hand, I know there are government programs that are set up to help people with ARMs to refiance with low/no costs to avoid foreclosure. While I am in no risk for foreclosure, I will almost certainly loose money on selling my home and I hate spending most of my $$ on mortgage (certainly more than 40%), so I might qualify. Any of y'all know about these programs or direct me to somewhere I can educate myself, let me know.

Secondly, with near 0% interest rate, the dollar is about to go DOOOOWWNNN and will most likely lead to a period of way increased inflation in the 3-5% rate at least (versus current ~2%). Having lived through a period of hyperinflation abroad, I know what can happen in these situation; people save less, items go up in value (my parents sold their car for more than they paid for it new when they moved to the US). Anyway, since even moneymarkets are about to pay way less than inflation, what to do with your emergncy fund? (TIPS (treasury inflation protected securities)? intermediate bond fund)? Are you guys moving your dollars for Canadian dollars? Swiss Franks? A basket currency? An icelandic Krona ;) (?)

I hope this sparks a lively debate!!
1) Don't refinance. With only two years left, it'd be stupid. Also, quit trying to take advantage of the government's program to bail out stupid homeowners. On NPR the other day I heard only 324 people have applied for it and none have been approved. It is a miserable failure of a program.

2) Everyone thought the dollar was going to weaken a few months ago. Guess what? It strengthened. It turned out all the other currencies were facing the same issues we were. Check out that icelandic Krona for example. Have you not been watching the news about the riots in Iceland? You really want your money in that country? Lastly, emergency funds should be kept pretty liquid. Bank high-yield savings accounts and money market funds are the usual recommendations. The most important consideration is return of your money, not return ON your money. Remember that TIPS dropped 13% in only a few months this year. And money markets have been paying less than inflation for several years now. They're still paying more than putting the money under your mattress.
 
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