Good Time To Refinance Given Historically Low Interest Rates

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Freddie Mac has some interesting home mortgage interest rate statistics that give a degree of optimism for those who are entering the home market and a rare opportunity for those who may be interested in refinancing their home.

For a period spanning 20 years, from April 1971 to September 1993, 30-year fixed rate mortgages were offered above 7 percent.

Within that period, from November 1978 to October 1986, the interest rate was above 10 percent.

Unbelievably, the home mortgage interest rate peaked at 18.5 percent in October of 1981.

During the times of higher interest rates there were many parallels to today’s situation, including:

•Inflation was killing the economy and we experienced recessionary periods.

• Oil prices were rocking world markets.

• The threat of terrorism had entered the world with the Iranians holding Americans hostage.

• In 1971, you could purchase an ounce of gold for $41. Just before the peak in interest rates in 1981, gold peaked at $615 an ounce.

Today, gold hovers around $1,600 an ounce, slightly down from its peak.

An area of uncharted waters is Germany and Switzerland.

According to Kevin Dick of Kevin Dick Investment Management Group, if you have a savings account in either country, you are getting paid a negative interest rate.

In other words, they are charging you to hold money in their bank.

Today, there is a rare opportunity to refinance or purchase a home at historically low interest rates.

The caveat is you have to have good credit and fall within the lenders guidelines.

But don’t be fooled by the national media, it is not impossible to get a loan.

Based on the previous data, it is hard to predict when and where interest rates are heading, but it is easy to decipher that you may have an unbelievable opportunity with loan rates.

If you have a $200,000 mortgage and can reduce the interest rate by 2 percent, that saves you $4,000 a year or $333 a month in interest expense.

Alternatively, if interest rates return to the historic high of 18 percent vs. 4 percent, it would increase your interest costs on a $200,000 mortgage by $28,000 a year or $2,333 a month, which undoubtedly would put home ownership out of reach for most of us.

Ray Pugel is a designated broker for Coldwell Banker Bishop Realty. Contact him at (928) 474-2216.

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