This Week in Your Wallet: October 11, 2011
In the midst of other attention-grabbing headlines this weekend (Occupy Wall Street Spreads Across the Country! Amanda Knox Freed! World Series Favorite Phillies Lose in a Heartbreaker!), it’s understandable if you missed this tidbit: Mortgage rates have been hitting historic lows for five weeks in a row. The average rate for a 30-year-fixed rate mortgage fell to 3.94% last week, and rates on 15-year loans have hit a record low of 3.28%.
Given this news, I’m sure you’re thinking, “Great, let’s refinance!” But while refinancing may seem like a no-brainer, it’s not quite so simple. Banks are looking for people with good to excellent credit scores (720 to 760 and above), and you generally need to have substantial equity in your home — which is not something that everyone who wants to refinance has.
However, there is a way to determine if refinancing is right for you. As I said on the Today show yesterday morning, it is a good time to refinance IF:
–Your current interest rate is 4.5% or higher
–Your credit has improved
–You’re considering swapping from a 30-year to a 20- or 15- (more on this momentarily)
You also need to ask yourself: Am I going to be in this house long enough to make my money back in closing costs (typically 2% of the transaction, though by all means shop around and negotiate as hard on fees as you can). If the answer is yes, it generally means that going through the process makes sense.
If you have excellent credit but don’t have equity in your home, there is another option to look out for. It’s a government program called HARP — the Home Affordable Refinance Program. It’s for Fannie Mae and Freddie Mac mortgages, and you have to have paid 12 months of bills on time. HARP is designed to help you if you owe 80 to 125 percent of the value of your home — this means that you can be underwater and still qualify. However, the problem with HARP is that the wheels are stuck. Banks aren’t making the loans in part because of the amount of risk they are being asked to shoulder. The powers that be are working on this in Washington, and hope to have an answer by the end of the month, so stay tuned.
Finally, as this WSJ article suggests, and as I noted above, now might also be a good time to refinance your home to a shorter-term payment. If you can find a rate that keeps your payments about the same as you were paying on your 30-year loan, it just might be worth it.
Here’s the other news of the week:
Your Weekly Netflix Update in 100 Words or Less, Including this Title:
Monday morning, Netflix announced they won’t be splitting the online streaming and DVD mailing services into two companies. This means that you won’t have to pay two bills for the services each month, after all. In related news, inside sources say Netflix CEO Reed Hastings has been stuck at Starbucks for 36 hours, vacillating between two tall lattes versus one Venti.
A Financial Check-Up
The NFCC (National Foundation for Credit Counseling) launched a new online financial tool called MyMoneyCheckUp. It’s completely free, and gives an assessment of your financial health in four key areas: budgeting and credit management, saving and investing, planning for retirement and managing home equity. All you need to do is answer a few questions about your behavior in each area, and within ten minutes you will know whether you can continue on the same track or if you need to stop and make some changes. It’s like a grown-up game of Red Light, Green Light. So on that note, Go!
A Final Word on Steve Jobs — and a Dose of Inspiration
Last Wednesday night, amidst the flurry of media coverage on Steve Jobs’ passing, my daughter asked me, “What’s the big deal?” I told her that he’s the Thomas Edison, Henry Ford, and Albert Einstein of our times. Her response? “Into the textbooks!”
Whether you’re a Mac or PC person, Steve Jobs had an effect on your life. He had an effect on all of our lives. He was a man with a vision and an incredible work ethic. He didn’t just give us the iMac, iPod or MacBookAir (the latter of which is my favorite Apple invention) — he revolutionized the way we interact with music, technology, and with each other.
I know I’m not the first to say a few words in remembrance of Steve, and I’m sure I won’t be the last. I’ve been reading tributes that have ranged from bitingly funny (careful, it’s the Onion so there is some profanity) to insightful and contemplative. There is something he said that’s been making the rounds this past week, and as it’s one of my favorite Steve Jobs quotes, I’m going to share it here with you. Even though it was part of a graduation speech, it’s a bit of inspiration that we can always use, no matter what our age.
“Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma – which is living with the results of other people’s thinking. Don’t let the noise of other’s opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.”
Have a good week!
Jean
