Definition of Complacency: self-satisfaction especially when accompanied by unawareness of actual dangers
Source: Merriam-Webster online dictionary
We are once again experiencing a convergence of events that make this one of the best times to consider buying or refinancing your home – and may possibly be for our lifetime! Many Pennsylvania home buyers and those considering refinancing have been sitting on the fence because they are expecting mortgage rates to stay this low forever. Many buyers are assuming that Congress will pass another home buyer tax credit. This complacency could end up costing you tens of thousands of dollars if you wait too much longer! This may sound a bit dramatic but consider the following:
Rates near historic lows again!
In December of 2008 rates started to decrease to exceptionally low levels. This was fostered, almost entirely, by the government announcement a few months earlier that it would be buying mortgage backed securities (which are used as the basis for mortgage rates). This has kept the rates at an artificially low level. Consider a day in late May when the market panicked and rates jumped ¾% in one single day! This was a reaction to the government’s change in position that they would halt the buying of the securities soon and the result was that a lot of people who were expecting the low rates to last forever ended up with the reality of higher rates. Luckily, the rates calmed back down but this will happen again – it is just a matter of when – and when it does I believe that it will be unrealistic to stop the momentum of increased rates from that point forward. If you are thinking about buying or refinancing you should ask yourself what your reaction would be if you got caught on that day and how it would impact you and your finances. On a $200,000 loan this would equate to an added expense of over $34,000 over the life of the loan. That is a price tag of more than $1,000 per year for complacency!
First Time Home Buyer Tax Credit Expiration!
Although there is a hope that the First Time Home Buyer Tax Credit will be extended there is no guarantee. IF it is extended no one yet knows if it will extend with the same terms. Again, at some point, the tax credit will expire. If the current expiration date of November 30, 2009 holds then anyone buying a home after that time will have lost $8,000. If the credit does get extended, it will expire at some point. Some first time buyers are gambling on an extension but they should consider the risk of ‘waiting to see’. Again, a cost of $8,000 for complacency!
The goal of this article is not to instill fear into anyone looking to buy or refinance but simply to illustrate that, without notice, both the low rates and the tax credit may disappear before you have an opportunity to take advantage of them. There is value in exploring your options now. You can always decide not to do anything but at least you will have explored the availability and benefits of these once in a lifetime opportunities. If you don’t examine your options now you may be one of those people who, years from now, looks back and says “You know, we really missed an historic opportunity”.
The most important piece of this puzzle is to have help navigating the possibilities. First and foremost you must look at financing options and compare them against your goals. If you are looking to buy a home, please do yourselves a favor and get in touch with your Realtor as quickly as possible. Please see this article http://www.myfhamortgageblog.com/2009/09/first-time-home-buyer-tax-credit-set-to-expire-for-harleysville-and-montgomery-county-pa-buyers/ about important dates for the tax credit. Although time is ticking away, we have put some programs in place to alleviate some of the stress of timing for closing before the expiration of the tax credit but the most important aspect is that you get out there and find a house as soon as possible.
Don’t let complacency or the expectation that these real estate and mortgage markets will last forever. There are significant costs for this complacency and everyone is worried about saving money these days. So many people are complaining about the government bailouts, etc. and they keep asking “Where is our bailout”. Well, here it is! Government fostered low rates and $8,000 for buying a home look like a pretty good way to let the government help you a bit.
If you would like any additional information or updates about the above items or regarding any aspect of home buying, selling or refinancing please give us a call or visit our website:
Jason Klaskin
215-513-1332
jklaskin (at) in-mortgage.com
www.in-mortgage.com
