Lately, the stock market has had its fair share of ups and downs-and most recently, it feels like a lot more downs than ups. For most people, a dropping Dow Jones Industrial Average means a loss of confidence, and maybe even some panic. But for the wise, it can mean a tremendous opportunity.
See, the stock market is fairly closely tied to interest rates. As a general rule, when the stock market rises and people are making money and feeling confident-interest rates rise. When the stock market tanks and people are losing cash and feeling nervous-interest rates fall. And have they ever fallen.
You probably hear it on TV and the radio a lot lately, but interest rates are at historic lows. We're pretty much talking never-before-seen kinds of low rates, whether it's from a bank or a direct lender or the feds.
So the burning question is: How can you make this work for you? And the answer that rises up like a phoenix from the ashes of the NASDAQ is: Refinance.
Refinance your home. If you bought in the last couple of years and plan to stay in your home for a few more, refinancing to another 30-year loan could be a smart bet. Just check your break even point-the time it takes to make up in monthly savings what you pay in fees for the refinance. That'll give you the duration to expect for the refi to start paying off. For example, if you save $200 a month with your refi and the loan costs are $3,400, you'd break even 17 months into the new refi. And that means you're stashing an extra $200 a month into your savings account after that.
Or, if you've been in your home for several years, look into a 10- or 15-year refi. You not only get a shorter loan duration, you also get a much lower rate-and that means you save tremendously on interest. Plus, there's a fair chance you could lower your monthly payment, too. Smart stuff.
And it's all made possible because of today's insanely low interest rates.
Lenders have long thought they'd seen the bottom of interest rates in 2010. Turns out they were wrong. Because with the rather large plummeting of the stock market in July and August of 2011, interest rates sunk even lower. And for a homeowner who's looking to refinance, that can translate to hundreds of dollars or more in your pocket each month.
And if there's one thing this rough economy has taught us, saving money feels the same as making a profit.