A Quote From Dan Reeves. "We take what the defense gives us." While I must apologize to those who have less than fond memories of Dan's tenure as coach of the Broncos, this statement has stuck in my head for the past 20 years. I'm not much of a football fan but it definitely applies to the financial markets. Where are the opportunities in this market? Although there may be some in both the stock market and the real estate market, these uncertain economic times make investments in this area anything but a certainty. There is one opportunity out there where investment success is a sure thing: The opportunity to lower your borrowing costs.
Now I know I've been counseling readers to pay down or eliminate debt but this mainly applies to consumer debt. Because of the lower cost and tax deductibility of mortgage debt, the decision to retire the debt on your home mortgage should be made only after careful planning and analysis (perhaps that should be the subject of another post down the road). For most of my clients paying off the mortgage on the family home is not an option due to lack of funds. Everyone else needs to take a careful look to evaluate their current mortgage against others that are available out there.
Many Will Miss Out On This Opportunity. Here are some reasons why. 1. The hassle factor. The press of other business keeps many borrowers from taking the time to deal with this issue. It's not like placing an order online to acquire a listed stock; however, the process is much less cumbersome than it was five years ago. While credit standards and income requirements have tightened in recent months, it is still relatively easy for a qualified borrower to re-do a mortgage. 2. Greed. Everyone wants the lowest possible rate in the marketplace. The first question we are always asked is how low we think rates will go. Anyone who has followed this blog knows that we don't really know; however, I can tell you right now that I believe the current low rate environment can's last. With record deficits and huge government borrowing almost a certainty, it appears logical that interest rates will only go higher from here. Waiting for 4.75% instead of five carries a high risk that you will miss out on the opportunity altogether. 3. Reluctance to pay closing costs. Most everyone believes that closing costs are a rip off. Some mortgage lenders help perpetuate this myth by advertising no closing cost loans as an advantage they offer over other lenders. Virtually any lender can advertise zero closing costs just as any lender can offer very low rates. Both are available, just not in the same loan. The trick is to choose the right combination for you. 4. High Expectations. Many borrowers turn up their nose at an opportunity to save a relatively small amount of money like $120 a month. I might remind them that a low risk investment that produces $1440 per year at a return of 6% is worth $24,000. Even worse, there are no low risk investments that produce a 6% return in this market. Since 1980, my main business activity has been counseling borrowers in managing their largest liability. I have been well paid for this advice. I am offering my readers, at no charge, an analysis of their mortgage situation and recommendations as to the best course of action for managing this liability. Simply send me an e-mail or call my office (720)449-0200 and ask for Susan. She will tell you how to contact me by phone.
Gasoline Prices Up Again Already. A week ago, I warned that this would happen. Russia has cut off natural gas supplies for many homes in Europe and Iran and Venezuela are jaw boning for lower oil output in response to the renewed hostilities between Israel and Hamas . Keep your powder dry (stay liquid) and keep your eye out for opportunities. I will try to keep you informed as to prudent strategies.
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