Should you Refinance your home during the coronavirus? The real question is… because the Federal Reserve has lowered its target interest rate to 0% to 0.25%, is this a good time to refinance your mortgage? In this video, I’m going to shed some truth about refinancing your home after the Federal Reserve Interest rate has been lowered. I’ll break down what the refinance rates and mortgage rates are like AND what the banks are doing to respond to all this.
How to Pay Off Your Mortgage in 5-7 Years: https://www.youtube.com/watch?v=3f-ebCjeH8o
Okay, so last week, the Federal Reserve (U.S. Central Bank) has lowered the interest rates. Now…THIS interest rate is what the banks pay to borrow from the central banking system. So just because the rate is now at 0%, it doesn’t mean that you can borrow at that interest rate. Also, it doesn’t necessarily mean that mortgage rates have dropped either. You see, the banks charge what’s called a Marginal rate. This marginal rate is what the bank charges YOU on top of the interest rates that THEY pay to the central banking system. So your local bank may borrow money from the Federal Reserves at 0% but they may turn around and charge you 3-5% interest on your next mortgage or a refinance loan. This is how the banks profit from NOT using their own money. Get it? So what do I think about refinancing in general? Well… I’m not a big fan. And here’s why…
Why You Should NEVER Refinance: https://www.youtube.com/watch?v=1ntfVLshYBY
When you refinance your home, what you’re ultimately doing is resetting your amortization clock. What this does is, it takes your loan back into the “front-loaded interest zone”. When you refinance, the vast majority of your monthly payments go to pay the interest. NOT the actual mortgage balance. If you’ve made it to a 7-10 year mark on your mortgage payments, you’re actually starting to pay down the loan balance itself. But when you refinance, you kinda have to start all over… Back to where your monthly payment goes back to paying MORE interest even though the new rate might be lower… Get it?