There are certain times in life where change is the best thing that could have ever happened. Sandra Thompson replacing Mark Calabria is one I will celebrate for a long while.
Why? Well, Sandra Thompson gave us all a gift this past week by undoing the FHFA Adverse Market Fee. This is a huge win for everyone trying to capitalize on the equity they have built up in their homes. Mark Calabria initiated the Adverse Market Fee in August 2020 stating that there was "additional cost and risk" to FHFA with homeowners taking equity out of their homes. What he was really doing was increasing capital levels during last year's historic refinance boom.
Removing the fee will reduce interest rates, on average, by approximately 1/8th. This means more money will be put back in the hands of the homeowner instead of the FHFA. It will also continue to strengthen the options for homeowners coming out of forbearance. Given today's low interest rates. if you have not refinanced yet; Christmas came early this year!
Better yet, it’s the gift that will keep on giving. Because rates will stay low for a little bit longer. As Fed Chair Powell and Treasury Secretary Yellen continue to state inflation today is all transitory and express that the debt and the market remain under control. Powell noted last week that the Fed’s benchmark of “substantial further progress” toward full employment and stable prices remains “a ways off.” He also said the Fed will alter monetary policy only if inflation is "materially and persistently" on a higher path.
Powell, I ask you... how much is "materially"? and how long is "persistently"?
So what does all of that jargon mean? That those who want to purchase or refinance but had not yet, have just been given the gift of additional time. But this may be one of the last stops on the low-rate train. So how do you know which option is best for you?
Well, it’s all about the big picture.
I always advocate for purchasing more properties, because I believe in building wealth through real estate. However, moving isn’t always an option. Just had a baby? Need to pay off medical or credit card bills? Do you have to take care of a loved one? Whatever’s happening in life sometimes, moving is just too much. And I get that.
So here’s the next best thing. If you’re planning to stay in your home for at least the next three years or if you are thinking about turning your home into an investment property down the road you could save quite a bit of money every month by refinancing now, especially if you are still paying mortgage insurance.
It can also be about your quality of life. Maybe over the last year, you’ve been looking for a new home; but the right one keeps evading you. Let’s take out some of the equity in your home to give yourself a new bathroom, kitchen, or outdoor space. Because sometimes you have to treat yourself. And with interest rates so low, now might just be the time.