Buy, Sell or Refinance – What to Do?
Summer is officially over, the keiki are back in school, and the holidays are fast approaching. And you want me to think about my mortgage? Actually, I do.
With 30-year fixed mortgage rates once again below 4 percent, it’s a good time to start reevaluating your finances. Today’s rates are lower than they have been since May 2015, with the exception of a few isolated drops due to current global events.
Mortgage interest rates have a lot to do with the bond yields, such as the 10-year Treasury note. In general, when investors move away from riskier assets and into safer investments such as bonds, there is downward pressure on interest rates. Most of this movement from stocks to bonds occurs when levels of uncertainty rise stemming from current world events or the fear of growing economic weakness. Although we want to pay attention when we hear that the Federal Reserve may increase the cost of funds, it has very little direct impact on your mortgage rate. Here’s a brief overview on whether to buy, sell or refinance in this market.
Home values are up and expected to keep increasing in the future. In some cases, homes are being sold above asking price. With the current favorable interest rates, on a $500,000 loan amount with a 0.5 percent lower interest rate, you have about $25,000 more purchasing power at 3.875 percent (3.984 percent APR) than you do at 4.375 percent (4.487 percent APR). If you are a first-time home buyer, there are USDA loans that offer 100 percent financing in select areas of the islands. The Freddie Mac Home Possible Advantage program offers a 3 percent down payment requirement and a reduced mortgage insurance premium. Additionally, HHL offers the Mortgage Credit Certificate Program that allows a dollar-for-dollar tax credit of up to 20 percent of the mortgage interest paid per year.
With home values up and inventory low, we are in a sellers’ market. If you are ready to move up, not only will you get a premium on your current home, you will have a low interest rate on the one you buy. Statewide, the median price of a single family home in August was $699,000, up from $650,000 a year ago.
I highly recommend contacting your real estate professional for an estimte of the current value of your home. With increased equity, it will make it easier to now refinance or possibly remodel. Even if you refinanced within the past few years, rate changes could justify consideration to refinance again.
Many of my clients are thinking about scaling back and getting ready for retirement. The children have moved out so a large home may no longer be needed. You may want to consider moving to one of the new condo developments in Kakaako and other areas. The equity in your current home could be sufficient to refinance and meet the down payment requirements.
Whether you are thinking of buying, selling or refinancing, I highly recommend speaking with a Honolulu HomeLoans professional who can assist you with the process. They can provide information and recommendations that will help you determine the best path and make the decision that works best for you. Please call (808) 681-7500 or visit our website at www. honhl.com to schedule a no-obligation consultation.