Real Estate News & Commentary

Why Property Managers Should Remind Clients to Refinance NOW

Expertise: Business Management, Landlording & Rental Properties, Real Estate News & Commentary, Real Estate Marketing, Personal Development, Real Estate Investing Basics
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"There is no formula or mechanical answer I can give you," said Federal Reserve Chairwoman Janet Yellen when the ranking member of the Senate Banking Committee pressed her for details about the Fed's plans for continuing the Quantitative Easing and Zero-Interest policies that have propped the economy up since 2008. "The economic outlook is very uncertain."

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While that might seem to mean nothing at all, to someone familiar with the lingo of the Fed, it speaks volumes.

In short, it means that we need to keep doing what we’re doing for a while longer until things start looking more certain. To make that even more explicit, it means that interest rates are going to remain as close to zero as Federal money policy can make them.

What Does This Mean to Me?

To turn that into actionable advice, that means that now is a good time to refinance any mortgages you have on any properties you own — especially investment properties.

The 10-year Treasury bond rate — which typically predicts changes in mortgage rates — is currently at one of the lowest points it's been all year (it began the year at 3%; as I write this, it's at 2.35% — the only single day it has been lower during 2014 was on August 15th).

The 10-year treasury rate usually operates about 2-3 weeks ahead of the mortgage rate, which means about the time you read this, it will have “trickled down,” and mortgages ought to (provided no major market shocks in the interim) be near the lowest they’ve been all year.

The Long and Short Of it

Yellen noted that, while the housing market “has recovered notably…readings this year have, overall, continued to be disappointing.” In other words, the market still needs whatever massaging the Fed can give it in the short term.

Related: Refinance Before Making Late Mortgage Payments

But in the long term, the Federal Reserve lawmakers have clearly indicated that they fully intend to slow down the Quantitative Easing purchases that have been flooding the market with fresh capital — and that they intend to ease the interest rates back up sometime next year.

In other words, every indication is that in the short term, refinancing is a great idea — and only in the short term. If you wait, the likelihood is very good that you’re going to end up paying more than if you don’t.

Reasons to Refinance

There are more reasons than just a low rate to refinance — though the low rate makes all of them more pleasant.

You can use a refinance to shift from a 30-year to a 15-year mortgage and pay off a loan faster; you can shift from an ARM to a fixed-rate loan; you can even — if the circumstances actually make it a wise idea – increase your cash flow by refinancing to another 30 year loan and lower your payment or cash out some of your equity and use it to reinvest or pay off other nastier debts.

Related: Refinance pitches: Lessons Not Yet Learned

As property managers, it’s part of our job to understand these facts — as well as the condition of the market — and be able to use them to our clients’ advantage. By keeping up and offering sound advice, we can be more than just “that guy who keeps the rent coming in.”

We can be “that guy I trust with my portfolio,” and that is precisely where we should aim to be.

What’s your view of the current economy? Will you suggest that your clients refinance?

Leave your opinions below!

While in the mortgage business, Drew rose to a VP position at the first broker he worked for and then started his own company. In the pursuit of excellence, he obtained several mortgage designation...
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    Kris C.
    Replied almost 6 years ago
    Refreshing perspective from a property manager thinking like an “asset manager” and not just a “rent collector”.
    Drew Sygit
    Replied almost 6 years ago
    KRIS: thanks, we do have some asset management experience:)
    Kris C.
    Replied almost 6 years ago
    Refreshing perspective from a property manager thinking like an “asset manager” and not just a “rent collector”. Reply Report comment
    Replied almost 6 years ago
    In some areas, property values are almost as high as pre crash if not higher (i.e. Austin, Texas is ~20% overvalued-the highest). Now is the time to keep your powder dry and/or gather some cash to capitalize for the eventual downturn in a year or two (this bull market seems to be loosing steam-Feds quick sugar-rush fix is bringing inequality in US since the great depression) since the real estate has been perked-up by big hedge funds and foreign investments (not much from the first time buyers)… my 2 cents..
    Drew Sygit
    Replied almost 6 years ago
    FF_LOVER: great comments! If you do cash out, just be sure you still have strong cashflow to ride out any potential downturn.
    Kyle Hipp
    Replied almost 6 years ago
    I would say that anybody that didn’t already refinance since late 2010 or so should but most shoupd already be good. They would have left a ton of money on the table if they have. 6% -8% mortgage and are just now looking to refinance. I am also of the belief that interest rates will remain low for some time yet. I don’t see any catalyst that would cause them to rise. I would be very surprised if a quantitative easing program of some kind does not stay or come again in some fashion over the coming months. The economy is a lot better than it once was but is not completely self sustaining at this point. The household sector in the private sector is still weak. It really needs fiscal support but seems unlikely with the incompetence running the federal government. Monetary policy will have to tide us over….
    Drew Sygit
    Replied almost 6 years ago
    KYLE: good point on the refinancing, but many still haven’t. It’s interesting that this article is getting economic comments:)
    Tim Stanford
    Replied almost 6 years ago
    The idea that quantitative easing is flooding the markets with capital is overly simple. The Fed’s QE is buying residential mortgage backed securities. They buy when the private market does not or cannot. There may be a flood, but it is not because of too much capital. It is because of a dam. The dam, Richard Cordray and the Consumer Finance Protection Bureau. What ever the amount of capital being pumped into the market, the uncertainty RC & CFPB have added to finance has exceeded the Fed’s best efforts. The mortgage reform efforts are misguided in that they have made it harder for worthy buyers to obtain financing. It is a stupid way to improve mortgage lending to reduce risk by artlessly reducing the number of mortgages being originated. With that out of the way – Great thesis! Based on loan rates now is a fantastic time to borrow, just good luck with the increased lending requirements and borrower scrutiny!
    Drew Sygit
    Replied almost 6 years ago
    TIM: thanks for the market insight.