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Financial women are always aware of the big picture when it comes to their managing their money. They notice the overall trends and keep an eye on what is happening. One important aspect of this is having an awareness of interest rates. This is easy, because you see interest rates advertised for credit cards, mortgages and CD’s everywhere.
As an overall part of your money management, you want to make sure that you take advantage of trends, including interest rate trends. For example, you wouldn’t want to be paying 10% on a mortgage and earning 3% on extra saved capital. There is a good chance that you’ve already refinanced your home to lock in the extremely low rates we’ve seen for a while now. I’m certainly not a promoter of credit card debt, but I do promote locking in low interest rates for buying appreciable assets.
I know it may seem that real estate will never appreciate again, but everyone felt the same way in the early 1990’s, and fortunes were eventually made from real estate by astute investors. Can you believe that prime interest rates, which are those charged by banks for their most creditworthy customers, were almost 19% in 1981? While this extreme may not return during my lifetime, rates were over 10% in 1974, the period from 1979 through 1984, and in 1989 and 1990. The prime rate was 9.23% as recently as 2000.
I recall that the interest rate on my first mortgage in the mid 1980’s was around 12%. Can you imagine getting a mortgage with an interest rate of 20%? Having this perspective, a rate well below 5% screams bargain! I ran across this article from Forbes that makes several excellent points that you need to consider about refinancing your home. Regarding current rates, the articles states:
On July 22 Freddie Mac’s Primary Mortgage Market Survey, which provides a snapshot of national average mortgage rates, reported a national average rate of 4.56% with 0.7 points on a 30-year fixed-rate mortgage. At the same time last year, the rate was 5.2% with 0.7 points.
The article then goes into detail about other factors to consider, such as your overall financial picture and your breakeven period. By the way, the .7 means that you would have to pay 7/10th’s of 1% up front on the amount of the mortgage. Since a home is often an investor’s largest asset, it makes sense to pay attention to the lending around that asset.
In my 7 Steps to Deliberate Investing course, I delve into the financial big picture. I encourage investors to step back, and look at what is happening to be able to take advantage of large and long term money cycles as part of their overall wealth management, or work with a financial advisor that does. History has shown that this can lead to significantly greater investment returns, and greater investment returns means reaching your financial goals sooner.