Why Refinance Back into a 30-Year Loan?

Refinance Your Mortgage for Rate and Payment


By Rich Bersani, Vice President of FrontGate Mortgage, NMLS #133243

Sewell, NJ – One of the biggest reasons homeowners refinance their mortgage is to obtain a lower interest rate and lower monthly payments. By refinancing, the borrower pays off their existing mortgage and replaces it with a new one.

Refinancing typically occurs when mortgage interest rates drop significantly, but borrowers with recently improved credit scores (from paying off credit card debt, making mortgage payments on time, etc.) are often candidates for better interest rates as well.

The question most asked is, “But why should I go back into a 30-year loan?”

One option is to take the route of the “same payment” refinance, and actually pay off the loan faster and save money on interest fees in the long-run. If refinancing results in a lower monthly payment, you can still continue making the same payment you made in the original loan, and the extra money will be applied to the principal balance.

For example: Let’s say you have 25 years remaining in your current loan, and you refinance back to a 30-year loan with a slightly lower interest rate, resulting in a payment reduction of $200 per month. (Note: This is just an example. The actual amount could vary.) You could then take that extra $200 per month and apply it toward the principal on the new loan. At this rate, the loan will be paid off in 22 years and 4 months, which is 2 years and 8 months less than the original loan.

On the other hand, if are looking to take equity out of your home to invest, you may invest the extra money in a side-fund that could earn a better rate of return and grow to the amount of the mortgage (and beyond) in even less time. This method provides excellent liquidity, but having more direct access to this money may be too tempting for some homeowners.

Regardless of the reason for the refinance, call me today to find out if refinancing could benefit you.

Rich Bersani, Vice President of FrontGate Mortgage Company (NMLS 133243) a division of American Neighborhood Mortgage Acceptance Company licensed by the New Jersey Department of Bank and Insurance (#NO00004875).



October Updates

Ease on Down the Road What QE3 Means for Home Loan RatesIn  September’s issue of YOU  Magazine, we discussed  the possibility that the Federal Reserve would announce further purchases of Mortgage  Bonds to keep home loan rates low and help the economy continue to grow. On  September 13th, the Federal Reserve announced that it would indeed  begin another round of Bond Buying (known as Quantitative Easing or QE3). If  you’re in the market to purchase or refinance a home, you won’t want to miss  the latest on this story.

Eat That Frog! Getting Things Done Without CroakingThere is something a little intimidating about a long to-do list. And some  days, just seeing tasks written out in list form is enough to awaken the  procrastinator within any one of us.

5 Reasons Layaway Plans May Cost You More This installment-payment plan can help consumers avoid racking up debt when making holiday purchases, but it has its drawbacks. By Cameron Huddleston, Kiplinger.comLayaway has been making  a comeback since the recession. In fact, it’s been in the headlines recently  because several stores that offer this installment-payment program are reducing  or dropping layaway service fees.

Too Much of a Good Thing? The Dangers of Over-ExercisingAccording to the latest statistics from the  Centers for Disease Control, more than one-third of U.S. adults and  approximately seventeen percent of children ages 2-19 are obese. That’s just  one reason why a regular exercise routine is so important for all of us. Equally  important: being careful not to overdo it.

Too Much of a Good Thing? Part 2 Tips to Avoid OverschedulingThese days parents aren’t the only people who need organizers. Between after school activities and weekend events, kids can be just as busy if not busier than  adults. And while sports and extracurricular activities are healthy for children, sometimes it’s possible to have too much of a good thing.

To QE or Not To QE? That Is the Question


To QE or Not To QE?That Is the Question

You may have heard rumblings in the news lately about something called Quantitative Easing, or QE3 for short. If you’re in the market to buy or refinance a home, this is one story to follow.

What is Quantitative Easing?
Quantitative Easing is the concept of the Fed becoming a buyer of Treasuries and Bonds to try and stimulate the economy. Oftentimes, the Fed does Quantitative Easing when they are hoping to achieve the following things:

  1. To create inflation and avoid a deflationary economy
  2. To lower the unemployment rate
  3. To boost Stock prices

Keep in mind that one of the consequences of Quantitative Easing is that the US Dollar will weaken. This makes US exports more affordable abroad, as well as makes imports appear relatively more expensive. This will help large multi-national companies–which have a large influence on the economy and the major Stock market indices–thus stimulating our economy and hopefully our Labor Market, which continues to struggle.

What Happened During the Last Round of Quantitative Easing (QE2)?
It’s important to understand that home loan rates are tied to Mortgage Bonds, and when Bonds improve, home loan rates typically move lower. History has shown that Bonds and home loan rates typically improve in anticipation of Quantitative Easing, but then worsen once the official announcement is made. Think about the old investing adage: “Buy on the rumor, and sell on the news.”

In a speech delivered on August 27, 2010 in Jackson Hole, Wyoming, Fed Chairmen Ben Bernanke mentioned that QE2 may be coming, saying, “I believe that additional purchases of longer-term securities, should the FOMC choose to undertake them, would be effective in further easing financial conditions.” But the Fed didn’t take action and begin QE2 until November of that year. Bonds and home loan rates enjoyed a nice rally until the actual official announcement was made.

However, once QE2 officially began in November 2010, we saw a big move higher in Stocks. By the time QE2 concluded in June 2011, the S&P 500 had risen 19%. And when investors moved their money into Stocks during this time, Bonds and home loan rates suffered as a result.

The Bottom Line
On August 31st of this year, Bernanke was back in Jackson Hole, Wyoming delivering anotherspeech on Economic Outlook and Monetary Policy. While he did not commit to another round of Quantitative Easing or QE3, he hinted that one was possible.

If rumors of QE3 continue to swirl, we should continue to see great home loan rates leading up to any actual announcement.

But if the Fed decides to move forward with QE3 and Stocks rally like they did during QE2, the Stock rally could come at the expense of the Bond markets–which would in turn push home loan rates higher.

The great news is that home loan rates remain near historic lows, making now a great time to purchase or refinance a home. If you have any questions about your personal situation, or if you’re wondering how you can take advantage of today’s low rates, contact me at 856-401-9090 x103.


What is the Velocity of Money and How Does it Impact Home Loan Rates?

Rich Bersani, Vice President
FrontGate Mortgage

Sewell, NJ – If you’ve been watching the economic news, you’ve probably noticed that market experts and traders have been keeping a close eye on the Commerce Department’s Personal Spending and Personal Income reports. Obviously, those reports provide insight into the health of our economy, but did you know they also influence home loan rates? That’s right, personal spending can actually influence the interest rates that are available when you purchase or refinance a home.

Here’s why. It has to do with something called the velocity of money. Even though the government keeps pumping money into the system, nothing happens until that money is spent or lent – and passes from one hand to another or one business to another. The speed at which this money passes between parties is called the velocity of money.

With the job market still very sluggish, consumers aren’t spending much money these days, and businesses are still reluctant to spend money to make investments in their business. With the present velocity at low levels, inflation remains subdued and that’s good for home loan rates. That’s because rates are tied to Mortgage Bonds and inflation is the archenemy of Bonds, so low inflation is good for Bonds and rates. However, once velocity increases, the excess money in the system will cause inflation – which is bad for rates, since even the slightest scent of inflation can cause home loan rates to worsen.

While we certainly want to see better economic recovery news in the near future, we have to remember that there’s an inverse relationship between good economic news and Bonds and home loan rates. Weak economic news normally causes money to flow out of Stocks and into Bonds, which helps Bonds and home loan rates improve. Strong economic news, on the other hand, normally has the opposite result.

Currently, home loan rates are at a historically low level, but that situation won’t last forever. That means now is an ideal time to purchase a home or refinance before the velocity of money – and rates – change. If you or anyone you know would like to learn more about the current economic situation and how to take advantage of historically low home loan rates, then please contact me.