| Refinancing: Don't Waste Time Wondering, Just Do It
If you're not changing the term of your loan ... even dropping your rate by an eighth makes sense because you did not have to change anything to get a loan," says Bob Walters, chief economist for Quicken Loans. "It always pays to get a lower rate." Say the current balance of your 6.5%, 30-year fixed mortgage is $250,000 and you are making monthly payments of $1,580. If you refinance into a loan of the same size that's one percentage point lower, 5.5%, you've dropped your monthly payments by about $160 to $1,420. But let's say you want to take out extra cash to pay off $20,000 in credit card debt: You'll need a new loan of $270,000. And even with that higher amount, your monthly payments are still reduced about $50 from your current payments to $1,533 a month. To determine how your monthly mortgage payments will differ under a new loan, use a mortgage-refinance calculator to determine the savings you might receive.
Ahead of the Bell: Mortgage Applications
Home-loan data to be released Wednesday will show whether applications rose for the fourth-straight week as borrowers took advantage of lower rates. The Mortgage Bankers Association is scheduled to report its index of home-loan application volume for the week ended Jan. 25 at 7 a.m. EST. The seasonally adjusted index surged last week to the highest level since April 2004, with refinancing applications fueling the climb. For the week that ended Jan. 18, the trade group's seasonally adjusted index of mortgage application volume rose 8.3 percent to 981.5, spurred by a 16.9 percent jump in refinancing applications. Purchase applications fell by 4.6 percent. The trade group said refinance applications had risen by 92 percent since early November, as homeowners took advantage of falling mortgage rates.
High anxiety: Wall Street waits for Fed to make move on rate cut
In the 20 years Mike Marcotullio has worked on Wall Street, he's seen historic market reversals that pushed weaker men to the brink of despair. Like Jan. 23, when the Dow whipsawed 625 points in one day, fueling drama on the trading floor that ranked up there with the fallout from the crisis in the Long Term Capital Management hedge fund in 1998 and the technology bust of 2000 and 2001. "There has been a lot of fear, panic and insecurity in the markets and the U.S. economy based on the housing decline," said Marcotullio, senior principal in American Capital Partners, an investment bank in New York City. This week, the stock market has been buoyed by hopes Federal Reserve Board Chairman Ben Bernanke will announce a one-half percentage point decrease in the Fed's key rate today, and until he does, stocks will still be subject to wild swings, fueled by concern the unfolding housing crisis could lead to more write-downs in the financial sector and tip the country into recession.
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