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Since the beginning of the year, 30-year mortgage interest rates fell from around 5% to 4.5%.

Now, over the past 4 weeks, 30-year mortgage rates have fallen to 4%, and for some, into the high 3% range for those with the best credit and lower loan-to-values. 20-year rates are approximately the same as 30-year rates and 15-year rates are even lower.

Mortgage interest rates are at their lowest levels since late 2017.

The interest rate environment is very favorable for anyone looking to purchase or refinance in the second half of 2019. For anyone that has a current interest rate of 5.25% or higher, it may be advantageous to evaluate refinancing in order to lower the monthly payment.  The magnitude of the benefit will largely be dependent on the loan-to-value ratio and credit scores.

For those looking to reduce the current payment and save money, I would recommend monitoring mortgage rates over the next 30 to 60 days since it is anticipated that they could move lower.

Another strategy that can be attractive for some is to consider refinancing into a shorter-term mortgage. There are 10, 15, 20-year or custom mortgage term loans available.  We can provide an analysis that shows the payments, the interest savings achieved and a comparison of the mortgage paydown compared to the current mortgage.

Lastly, with the rapid price appreciation in Colorado, many people who have considered getting an equity loan may have been reluctant to refinance their current first mortgage if it has a low interest rate. In some cases, it may be more beneficial to do a line of credit.  We can help run the numbers to see whether it is better to leave an existing mortgage in place and obtain a Line of Credit or refinance the entire mortgage.  This analysis compares the new rate versus the rate on the old mortgage plus the rate of the Line of Credit (i.e. the blended interest rate).

If you have any questions or if you want us to provide an analysis, please contact either Wayne or Kim.

For many homeowners, their home equity represents their single largest asset and the biggest component of their total net worth. However, home equity is also the asset that people pay the least amount of attention to when it comes to financial planning. There are many ways that the efficient management of home equity can enhance wealth and support many financial planning goals.

A mortgage/line of credit, or lack thereof, is most often the tool used to manage home equity and achieve various financial and lifestyle objectives that people have at different times in their life.

Background

If you have owned a home in Colorado for more than 5 years, Congratulations! You have most likely made a lot of money.

From March 1991 through September 2018, housing prices in Colorado have increased 366.03%. In the past 5 years housing prices in Colorado have increased 58.76%.  In the Denver metro area, the appreciation has even been higher.

During this time frame, Colorado has experienced the second highest level of housing appreciation second only to the District of Columbia. The top 5 states for appreciation since 1991 are as follows:

  1. District of Columbia        440.95%
  2. Colorado                            366.03%
  3. Oregon                               331.65%
  4. Utah                                    326.57%
  5. Montana                            306.57%

The national average for all 50 states during this time is 161% and every state had appreciation. For emphasis, there were no states where values declined over this period.(Source: Federal Housing Finance Agency (FHFA), Home Price Index (HPI), November 27, 2018)

Planning Opportunities

There are many financial planning opportunities for a homeowner to use their equity to improve their overall financial position and increase their wealth long term. These alternatives and options are tied to factors that are unique to each individual and their current goals and objectives. Following is a brief nonexclusive list of strategies and techniques, along with the respective benefit for each, that can be implemented to manage home equity in the context of the broader objective of financial planning:

The list above is not exhaustive, and there are many other strategies that may be effective depending on specific circumstances. The main point is that there are many ways to manage home equity in a manner that facilitates more effective financial planning.

If you are interested in discussing managing your home equity or discussing any of the strategies outlined above, give me a call.