There are two big New Year’s resolutions that just about everyone made last night:
1) Lose weight.
2) Save money.
We really can’t help you on the former (your dealings with the Hershey Co. are your own affair). But you might be surprised at how easy the government is making the latter – at least for homeowners.
If you got a mortgage sometime within the past couple years, you might consider heading straight to your mortgage broker and inquiring about refinancing your loan.
When the Fed announced in late November that it was buying up $500 billion worth of loans by Fannie Mae and Freddie Mac, mortgage rates tumbled – a huge boon for homeowners.
“Anyone who has gotten a loan in the last year has gotten one in the 6 percent range if they got a fixed rate,” says Julie Teitel, a senior vice president with mortgage firm GuardHill Financial.
Many homeowners now are finding rates at least a full percentage point lower on fixed mortgages. And adjustable-rate mortgages have also fallen.
Take John James Ball, who is shaving a full percentage point off the mortgage for his condo at 20 Pine St. in the Financial District.
“I’ll be [saving] $687 in interest payments per month,” he says.
Ball, who works in finance, also has a property on 72nd Street, a third on Chambers Street and a fourth in New Jersey. He has adjustable-rate interest-only loans on those homes and is looking to refinance all of them.
“Depending on the mortgage, [the savings will be] between $300 and $500 per month [per property],” he says.
Ball says that within six to eight months, he will break even on refinancing. After that, he will be saving thousands of dollars per month.
This is the key question for anybody thinking about refinancing (which, after all, isn’t free): How long will it take to recoup the closing costs?
“For most clients, I like to see a break-even of four years or better,” says Dave Steinberg, president of mortgage firm Summit Funding.
“It would be the rare client for whom a longer break-even would make sense. A longer break-even might work for a couple nearing retirement who intend to stay in their home and have no plans for renovation – but that is rare.”
Nevertheless, those in it for the long haul are also taking the plunge.
Javier Lattanzio, a sales manager for real estate firm Time Equities is going so far as to pay $175,000 off the principal of his mortgage to snatch a good rate.
“I had a loan of $800,000 at a rate of 6.75 percent,” says Lattanzio, about the loan for the Central Park West condo where he lives with his wife and two sons. He is currently shelling out $4,500 a month solely in interest.
But when he found a rate of 5.125 percent on a conforming mortgage (the new 2009 limit on conforming loans is $625,000), Lattanzio decided to think long-term.
“If you’re going to stay in the apartment for the next five or six years, it makes sense,” says Lattanzio, whose interest payments will fall to $3,100. He adds that he can always refinance again if he needs some of his cash back.
But even though deals are tempting right now, many borrowers think rates will dip even lower.
“There’s talk that they’re trying to get [fixed] rates down to 4 1/2 percent,” says Melissa Cohn, president of Manhattan Mortgage. “So a lot of people are calling up and saying, ‘Is my rate 4 1/2 percent yet?’ No, not yet.”
But even though rates could go lower, homeowners might not want to wait too long.
“You still have to take things in perspective,” Cohn says. “Historically rates are very low, and in any sort of volatile market if you wait for the rate to go where you want it to go, you may miss the opportunity.”