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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: J. P. who wrote (11731)	7/24/2003 10:41:02 AM
From: GraceZ	Read Replies (2) \| Respond to of 306849

I cared a lot about interest rates when I bought that house ten years ago (we paid 159k with a smaller mortgage amount) and I still do because I used the low rates to have a shorter term when I bought it (rates were 7%, but housing was also in a slump so I got a good deal and the seller was distressed). Who the hell wants a mortgage when they are in their sixties? I refinanced my mortgage this year to lower the payment, pay off all higher floating interest rate loans and shorten the term. I didn't bother on the one rental property because even though it has a 7% loan it's a 15 year with about 3 years left and 8k balance left on it, so the costs are above the savings unless we do a big cashout. We'll most likely do a cashout on it before the loan is paid off because there is little tax advantage to having a rental property without a loan when you have a high marginal rate. I can get a better return putting that money in something else (equities or another property). The other rental has an adjustable which is at 4.25% which doesn't adjust until October and we have a sale option on it which should close this summer. It's a big mistake to think that the interest rate doesn't matter much because there is only a small amount of money owed. If I have an investment worth 150k I care a lot about the return, so why wouldn't I care about the outgoing interest? Cutting your outgoing interest rate is a tax free gain. Rates would have to drop significantly below 5% for me to refinance again because I'm so close to being paid off. I wouldn't ever say that can't happen, the bond market has proven to be almost as volatile as the damned equity market lately. I wouldn't cross off the possibility of anything happening at this point. I bust my ass trying to make money in the market, lowering your interest rate is like getting tax free income no matter how small the amount is. I encouraged all my clients with 400-700k houses a while back to refinance and pay off all floating rate debt as well as shorten their terms. They're all pushing 50 and I think you need to start thinking in terms of paying off the house at that age. I knew that if house prices dropped in their area they wouldn't be as miserable if their mortgages were smaller and their house equity high. Most have loan amounts that are far less than 50% but since the low risk returns are so low, even paying down a 5% mortgage is a far higher return than they're getting in the money market with their cash and they're all sitting on piles of cash.