I refinanced my home from a 1 yr (30 years) adjustable to a 15 year fixed. I pay 500 more than I was, but save significantly on the back end.
If rates continue to fall as they are, I will refinance again, to a significantly lower 15 year rate, and save even more. This is the surest savings I can find anywhere, and it will free up cash that I can once again put into the market.
Basically, it would be a savings of $100 per month for each point I save (actually, slightly more), or more than $18,000 over the life of the loan for each point.
That is why I love the current environment.
My one fear: are we in a liquidity trap? If so, I could refinance til the cows come home, and ownership is still a waste.
But, I don't think liquidity is the problem today. It seems to me that there a still a lot of companies saddled with high interest debt that will benefit from the current environment, much as I have.
That will improve bottom lines, encourage new investment, and reverse the current trend.
If Greenspan acts quickly, the countries currently suffering will bounce back quickly...and any recession, at home, will be short-lived (if there is one at all).
If we are in a liquidity trap, there ain't much anyone can do anyway. There aren't any cures to that, or at least none that I have ever heard of. The only "cure" is a tax cut, and heavy deficit budgeting. Even then (assuming you feel it's a cure - and I don't believe in Keynesian economics), it takes a LONG time for it to kick in.
MHO is that we are in a very unusual situation right now, one UNLIKE any we have seen before. However, it won't take much to put us over the edge one way or the other. That is why Greenspan's hand is so crucial. He has played it well thus far. Hopefully, he will continue to do so. |
