Mortgage refinancing – the good, the hype, & the ugly
Happy Monday Eagle Wealth Community,
One of the biggest parts of our jobs is listening and lately, we’ve heard a trend in our conversations. Many of you have asked if it’s the right time to consider a mortgage refinance. So, let’s dive in and touch on the key questions you need to answer to make an informed decision.
If you purchased your house when interest rates were higher than current record lows, you might be wondering: should I refinance? You’d think the answer would be simple — a lower interest rate is better, right?
However, it really depends on your situation. And with the way fees and mortgage interest work, a refinance can be a bad deal.
Here are some key questions to consider:
One: How long is the new mortgage term? Mortgage interest is front-loaded, so if you get another 30-year loan, you're likely significantly adding to the total interest you'll pay for your house. On the other hand, if you refinance your new 30 year mortgage, you can always pay extra to the principal can take that interest savings to pay off your loan faster, it could be a savvy choice. Based on the small difference in interest rates savings and large payment difference between a 15 and 30 year mortgage, it is usually safer to do a 30 year mortgage that you can pay extra to rather than be tied into a larger payment that you can not lower.
Two: What are you going to do with any money you take out or save in payments? If you can put it toward your financial goals, refinancing might be a smart money move. However, if the extra money just gets spent, it’s not benefiting your overall finances.
Three: What’s it going to cost you to refinance? If you’re looking to lower your monthly payments, make sure you understand how many years it will take to break even on financing fees. If you leave your house before that period is up, you’ll have lost money.
And Four: What else is going on in your financial life? Do you have debt you’re paying down? Are you expecting any major life events? Will you qualify for a new mortgage? These all will affect your refinancing decision.
So, while the basic math on a refinance might seem simple, financial decisions rarely are. Refinancing might make sense if you're not extending your loan term, plan to stay in your house for many more years and can get a significantly lower rate. However, in many cases, making extra principal payments on your current mortgage might work out better for your long-term finances.
As your Family’s Chief Financial Officer, you can count on us to guide you through big decisions and be the support system you can trust. If you’re thinking about refinancing, please give us a call and we’ll walk through all your options.
Your Eagle Wealth Team
How Will The Election Affect The Market?
We’re hearing lots of questions about how the election will affect the markets, so we filmed a video to help out. If you missed it last week, please watch Chad’s video for some insight on the election, the markets, and what to do during uncertain times.
watch time: 9 minutes and 52 seconds
The Week on Wall Street
Stocks were mixed last week as worries that stretched from Washington D.C., where prospects of a new fiscal stimulus bill dimmed, to Europe, which saw an increase of new COVID-19 cases.
The Dow Jones Industrial Average declined 1.75%, while the Standard & Poor’s 500 fell 0.63%. The Nasdaq Composite index gained 1.11% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slumped 4.20%.[i],[ii],[iii]
Late Friday Rally Pares Losses
Dwindling chances of a federal fiscal stimulus, pre-election jitters, and worries over a second wave of coronavirus infections in Europe weighed heavily on investors.
The weakness in technology persisted. The Department of Justice proposal to curb legal protections for internet companies and require them to take greater responsibility for the content on their sites adding to that sector’s woes.[iv]
Energy stocks were also hit hard on concerns of a slowdown in economic growth hurting oil demand.
The week wasn’t entirely absent of good news. Investors focused on reports of new progress in developing a vaccine and the passage in the House of Representatives of a bipartisan continuing resolution bill to fund the government through December 11th.[v]
Absent any apparent catalyst, stocks rallied in the final days of the week, cutting losses on major indices and powering the NASDAQ Composite to a weekly gain.
Fiscal Stimulus on Life Support
Market hopes for an additional fiscal stimulus bill, which were already fading, suffered another setback as events in Washington, D.C., appeared to make it more unlikely that lawmakers and the president could come together to fashion a compromise spending bill.
Many economists and market observers, along with Federal Reserve Chairman Jerome Powell, believe that further spending may be needed to maintain the momentum of the current economic recovery.
THIS WEEK: KEY ECONOMIC DATA
Tuesday: Consumer Confidence Index.
Wednesday: ADP (Automated Data Processing) Report. Gross Domestic Product (GDP).
Thursday: Jobless Claims.
Friday: Employment Situation. Factory Orders.
Source: Econoday, September 25, 2020
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
THIS WEEK: COMPANIES REPORTING EARNINGS
Tuesday: Micron Technologies (MU), McCormick (MKC)
Thursday: Constellation Brands (STZ), Pepsico (PEP), Conagra Brands (CAG)
Source: Zacks, September 25, 2020
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
[i] The Wall Street Journal, September 25, 2020
[ii] The Wall Street Journal, September 25, 2020
[iii] The Wall Street Journal, September 25, 2020
[iv] The Wall Street Journal September 23, 2020