Is Now a Once-in-a-Lifetime Opportunity to Get (or Refinance) a Mortgage?

For those of you who have a mortgage: 

Rates have dropped to new all-time lows so you should lock in a rate to refinance your loan.

Wholesale rates are now below 3.0% for a 30-year fixed mortgage so that means retail rates at the most competitive institutions are now under 3.125% for a no-cost, 30-year mortgage for someone with 740+ credit and 20% equity.

How to Refinance Your Mortgage

Does a 3% Rate Make this a No-Brainer?

Provident is currently the cheapest of the large, low-cost lenders though they are tough and by-the-book so you'll have to be totally buttoned up and prepare for a bit (I can explain more if needed here).

Is this worth your time? Yes. Going from even 4% to 3.25% saves you $15,000 in interest for every $100,000 of your mortgage over the 30 years of your loan.

For those of you that don't have a mortgage:

Consider yourself lucky for having avoided the epic debacle that was the last ten years but also consider finding a way to enter the market. I  think there is a good change that right now will be looked back upon as a once-in-a-lifetime opportunity, given the combination of bottoming prices, record low interest rates and the inflation we may likely experience at some point in the next 10-20 years.

There is no question that the costs-to-own have fallen below the costs-to-rent, at least in Chicago.

The better questions are down payment and personal. The latter is all about your personal preference and personal situation (ie: how long you are willing to commit to living in or at least owning the same place). The former, the down payment, is always the hardest part. But 30-year FHA mortgages that only require 3.5% down have interest rates in the threes, as well, though the APR may be above 4% because of FHA costs.

Let's say you go FHA and put 5% down on a $200,000 home and get a 30-year mortgage at 3.5%, the real cost to you should be under $1,000 per month, which is outrageously good.

The rough math is that your mortgage payment would be about $850, $300 of which would go to pay down the balance and $550 of which was interest. You'd probably have a $2,000 to $2,400 property tax bill so call that $200 per month for taxes. Then you'd have assessments, if it was a condo. In a smart, well-run building, they'd be under $200 (mine are under $100) but let's call it $200. If it was a house, you'd have other maintenance costs that would likely run similar. Then add in $50 for things like insurance and miscellaneous. The all-in cash outlay in this scenario is $1,300 but keep in mind that $300 is going essentially to you to pay down the balance and that the $750 for interest and taxes would get you up an a $9,000 annual tax break, depending on your tax situation, which would add $2,250 in savings, or almost $200 a month, at a 25% federal tax rate. With the full tax benefit, the real cost is about $800.

Also, I'm only using the first month math. It will get better every single month after that - same payment, less interest, more principal - because mortgage payments are amortized:

Mortgage Amortization Table

Also, if you don't have a totally straightforward situation, be it the property, your personal life or your finances, that can make the process more complicated but not impossible. I've dealt with all three at times and usually have made it work. You just have to skip the cookie-cutter lowest-cost provider like Provident and go somewhere you will get a little more service and time from.

I enjoy this stuff so happy to dive into the specifics with any of you further in the comments!

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