...that is not the question. The question is when?

I dropped by the credit union this noon to see what the loan officer there could do for me in the coming Perfect Storm (we hope) of interest rate reduction. Ideally, m’jihito and I would like to refinance the investment house to cut our communal mortgage bill a bit.

The loan officer said they expect rates to drop on Monday, but possibly as early as Friday. This depends, of course, on a number of things, not the least of which is the stock market’s performance. Nevertheless, they’re fairly confident that mortgage rates will drop. Exactly what today’s cut of 50 basis points will do, so shortly following the 75-point cut, remains to be seen.

The two loans we have on that house, one for about $188,000 and the other for about $22,000, are at 6.6 percent and 8.5 percent, respectively. The credit  union’s current, pre-(supposed)-rate cut refinance rates range from a low of 5.35% plus 1 point for a 30/15 loan  to a  high of 5.875% plus 0 points for a 30-year fixed loan. Depending on which of several choices in between we might make, the out-of-pocket cost for the refinance would run from $1,846 to $3,946.

If we saved a hundred bucks a month, we would recoup our cost in 18 1/2 to 39 1/2 months. If we saved two hundred, the loan costs would pay for themselves in 9 to 19 1/2 months.

Actually, these recoup periods would be somewhat accelerated by the fact that $1,000 of each monthly payment is coming out of stock investments: the more we can leave in that stock fund, the more it earns and so the less the mortgage payment costs us. As it were.

To make a refinance worthwhile, so they say, you need to achieve a rate cut of at least 1 percent. If we went with the 30/15 loan, the current rates would take us there. So we’re already silver-plated.

But the 30-year fixed-rate loan with 0 origination points: now that’s golden. And it only needs to drop 3/10 of a point to get us where we want to go.

The loan officer suggested we fill out an application now, which we can do online, for a 30-year fixed. Assuming we qualify for that, we’ll qualify for any of the other options.

The iron is heating up. Time to get ready to strike!

debt, personal finance, real estate