AT LAST! A POSITIVE FROM THE CORONAVIRUS – NOW IS THE TIME REFINANCE OR OBTAIN YOUR MORTGAGE
Vice President Pence was criticized when he stated the best way for the American people to calm down – “turn off the television sets”. I happen to agree, as the media is feeding the panic.
I work from home and keep a business/investment channel on my televisions. But often mute the televisions because I do not want to hear paid “Talking Heads” reading or making up their opinions. The enemy of 24-hour news – “Dead Air”. {I keep the channel on so I can see information about indexes or stocks I own or have an interest.}
I often hear them discussing a subject that is aligned with my field of study or career {Environmental, Health, Safety and Security} and they are often DEAD wrong.
PANIC BUYING AND SELLING
Below is a ten-day (broken out by the hour) S&P 500 chart and you see good versus bad news days. The situation simply cannot change as often as this chart indicates. Unfortunately, when we are bombarded by negative talk, we become biased and many of us sell. And when they mention a few positive stories, some people think a great time to enter and they buy. This is the reality and danger of their constant TALKING!
THE GOOD NEWS – MORTGAGE RATES JUST HIT AN ALL TIME LOW – WHICH COULD BENEFIT NEARLY 22 MILLION AMERICANS!
This week, mortgage rates hit a new record low. The national average rate for a 30-year fixed-rate mortgage was 3.29%, the lowest level in its 50-year history. The average rate for a 30-year mortgage was 4.94% as recently as November 2018. Today, the average rate for a 15-year fixed-rate mortgage was 2.79% through Thursday. Today may be a GREAT time to refinance your home mortgage or buy a home or investment property. If you financed a $200,000 loan at 4.94 percent, your monthly payment is $1,066.00. BUT at 3.29 percent, your payment drops to $875.00, saving you $191.00 EVERY MONTH! Money you can wisely INVEST for your future!
Should You Refinance Your Mortgage?
Locking in the current low mortgage rates could save you tens of thousands of dollars over the lifetime of your loan. The cost of refinancing can run between $3,000 and $5,000, once you factor in fees for appraisals, title searches and so on. It is probably worth your while if you can switch out your existing mortgage for one with at least a 0.75% lower rate. Even if you purchased a home fairly recently, refinancing might make good sense, if you intend to stay in that home for six or more years.
KEY TAKEAWAYS
A lower interest rate on your mortgage is one of the best reasons to refinance.
When interest rates drop, consider refinancing to shorten the term of your mortgage and pay significantly less in interest payments. You may have the opportunity to refinance an existing loan for another shorter time frame loan with little if any increase in the monthly payment. Below calculations show you the savings of refinancing a 30-year $200,000 loan at 6.5% to today’s 2.79 percent for a 15-year loan. In this example you increase your monthly payment by ~$97.00 per month while saving $210,101.00 over that 15-year span! A WIN-WIN!
Switching to a fixed-rate mortgage—or to an adjustable-rate one—can make sense depending on the rates and how long you plan to remain in your current home.
Tapping equity or consolidating debt can be good reasons to refinance—WARNING doing so can sometimes make the debt trap worse.
It takes years to recoup the 3% to 6% of principal that refinancing costs, so don’t do it unless you plan to stay in your current home for more than a few years.
Refinancing can be a great financial move if it reduces your mortgage payment, shortens the term of your loan, or helps you build equity more quickly. When used carefully, it can also be a valuable tool for bringing debt under control.
CORONAVIRUS UPDATE
The number of COVID-19 coronavirus cases worldwide has reached over 100,000, including over~500 cases in the U. S. and ~ 21 confirmed deaths. My prayers and condolosences to those families.
The true U. S. Coronavirus fatality rate is unknown as we have tested to few people. We have been unable to accurately identify how many people are infected and have less-serious symptoms. As of Friday there were ~75,000 virus test kits in the United States, currently available. On Thursday, Vice President Pence said: “the U. S. did NOT have enough tests to meet what we anticipate will be the demand going forward.” VP Pence estimated an additional 1.2 million test kits should be available this week. Still an unacceptable low quantity.
The people most at risk are those with compromised immune systems, people approximately 80 years and older, and this virus for unknown reasons today, impacts men more than women. Although children can be carriers, the virus does not appear to be as deadly to younger people.
Protect yourself and your community from coronavirus with common sense precautions: Wash your hands, stay home when sick and listen to the CDC http://@CDCgov and local health authorities. PLEASE save the masks for health care workers. If your health/immune system is compromised, recommend you avoid cruises, air flights and other venues with crowds of people.
{TWO PREVIOUS BLOGS ON CORONAVIRUS}:
HOW TO MANAGE CORONAVIRUS HEALTH AND INVESTMENT RISK – March 2, 2020
WHEN THE U. S. HAS A COUGH THE REST OF THE WORLD CATCHES A COLD – WHAT HAPPENS WHEN CHINA HAS A CORONAVIRUS? – February 24, 2020
Stay calm, listen to the experts, and follow the science.
WHY HAS THE U. S. LAGGED AT CORONAVITIS TESTING VERSIS OTHER NATIONS?
The Center for Disease Control (CDC) initially chose to develop its own test versus outsource to private industry. Soon after the tests were shipped in early February, states had trouble validating one of three components in the CDC’s test kits. States could not confirm the test results. This delayed rapid testing among state and local labs, just as the deadly respiratory virus gained a foothold among infected travelers returning to the United States.
I have worked with several Federal agencies, (not including the CDC) and have found their core competency is War and SPENDING your tax dollars, not science nor manufacturing. The development of these test is best contracted to private companies, which are almost always more effective.
The Federal Government has done a poor job of procuring/producing these kits and we are short by millions. Pent up demand and fear will quickly consume the current supply. As we test more people, we will see a serious increase in cases and fear. This additional testing will however, provide a more acurate estimate of the U. S. fatality rate of this virus.
This is the same Federal Government some propose should take over heath care for 350+ million Americans! I pray NOT!
HOW YOU THINK IS EVERYTHING IN A VOLATILE MARKET
Fear is widespread, and we most likely have not have seen the bottom of this market. Warren Buffett said “the time to be fearful is when others are greedy and the time to be greedy is when others are fearful”.
Rather than panic, Warren Buffett is thinking! Last week I stated: “Berkshire holds over $128 billion cash and another $20 billion in miscellaneous fixed-income instruments. His buy philosophy: “we constantly seek to buy new businesses that meet three criteria. First, they must earn good returns on the net tangible capital required in their operation. Second, they must be run by able and honest managers. Third, finally, they must be available at a sensible price. “The key third criteria may be here. Buffett tends to buy when others are fleeing the market. As Berkshire Hathaway owns significant percentages in four airlines {Delta, United, Southwest and TBD), he may consider an acquisition. Also, energy is a key business strategy you may see an acquisition.”
This week Berkshire Hathaway made a significant purchase of Delta stock shares.
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ABOUT ME
I am a proud nerd (as my beautiful wife and daughter have told me) investment and finance blogger, with a NC State, Chemical Engineering, University Rutgers, MBA and Harvard University, Advanced Management education. I left a corporate career because I had a desire for making a difference as a speaker and writer, to help others. I was blessed to be coached and mentored by strong women and men in both my family and professional life. It is my time to serve and give back.
DISCLAIMER
I started my first business at ~13 years of age (small but brilliantly created plant nursery). I am a successful investor in stocks, options, real estate and happy to share my personal finance and investment lessons learned with you.
However, I am NOT a licensed financial advisor. Please do not construe my suggestions on this blog, as recommendations for your personal situation. For individual finance advice please seek your own licensed CPA or fiduciary financial advisors.
I write this weekly blog to make an impact by reaching an audience and demonstrating the need for financial literacy. I will help you get there.
