Thursday, March 13, 2008

What's In This Crisis for mE?!

by Tom Bozzo

OK, we will get an $1,800 loan that mostly will be paid back by the children. Otherwise, though, we're (knock on wood) not only in no danger of foreclosure but even ought still to have a fair amount of equity in the old homestead. So we're not exactly in line for any pending handouts to strapped homeowners. But at least we ought to be able to refinance on attractive terms, no?

As it happens, no. Or at least, not yet.

Since the Fed's interventions have gone into high gear — this really being an uncontained crisis and all — I've been tracking mortgage rate quotes from our bank. While they're not necessarily the lowest-price lender around, it so happens that we currently pay them (or their successors in interest) a weighted average interest rate of around 6% before taxes on our home-related debt, which is mostly the fixed-rate first mortgage. There was, maybe, one day since I started looking when we theoretically could have done a refi for a lower rate than we're paying now. Since then, not so much, as seen from the last 20 days of data (this is for a cash-out refi with ~80% CLTV, no points):

More helicopter, Ben!

So, as you can see, we've had $400 billion in actual and/or promised unconventional Fed intervention, and a refi would cost me 50 bp more than I'm currently paying. Perhaps more to the point, what I'd pay today, post-intervention, is 25 bp more for a 30-year loan (37.5 bp more for the 15-year) than I'd have paid had I for some reason correctly picked the last three weeks' trough.

Happily, I do have an option to convert the HELOC to a fixed rate, which I expect soon will be at the contractual minimum (lower than the first mortgage!), for a nominal fee. So I suppose I'll be able to thank Chairman Ben for something.

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