Thinking of Refinancing? Consider holding out for Rate Drop


A manufacturing report came out today that was weaker than expected, raising renewed talk that the Fed might cut rates later this month1.

What does this mean for you?

As rates have come down recently, now is a good time to look at doing a refi. If you can afford to wait, and signals continue to point towards another rate cut, I’d even suggest waiting out the next few weeks to see if the fed does indeed make a rate cut by month’s end. If you’re stuck in an ARM loan that is slated to reset in the next few months, maybe you should look at locking yourself into a long term 30-year fixed loan before the loan adjusts.

Dropping rates will certainly help out American consumers in dealing with credit and loan issues, however, as we continue to cut rates, confidence in the Dollar will likely decline further. While rate cutes may prove to save many consumers and homeowners, they may, in fact push foreign investors even further away from investing in our currency.

I continue to believe that we are headed for recession, and any moves that the Fed take now are simply too little too late.

Here are a few simple ways to plan for the possibility

1 – Be smart with your finances.
2 – Protect your home by locking in rates while they are low.
3 – Pay off your credit cards.
4 – Cut unnecessary spending.
5 – Learn to begin saving and investing.

All of these tips should be taken into consideration regardless of whether or not we do go into a recession. All are key ways in the long run to build your wealth and net worth.

Sources: Yahoo Finance – “Stocks Soar on New Hopes for Rate Cut”

About Author

Joshua Dorkin

Joshua Dorkin (@jrdorkin, Google+) is the founder and CEO of BiggerPockets.


  1. When I first mentioned to my friend, who works as a mortgage broker for Countrywide, that there were rumors of the FED cutting rates again this month, he immediately began whining! He replied, “This was all over the news?!” At the time it wasn’t; however, it has been since we had that conversation!
    Anyways my point is that you are right, Joshua, about recommending that homebuyers wait to see if the FED actually does decrease rates again; before refinancing. This was immediately evident to me as soon as my friend moaned that he’ll be having a really tough month!

  2. Not only have the number of bad mortgages increased, it appears that most regions have seen a decline in the property values. This is leading to record high forclosures world wide. If anybody is in an adjustable rate, it is very important for you to get out of it as soon as possible. Mortgage Rates are rising and it is important to act now. is ready to answer any questions you may have on a Mortgage refinance. It is your gateway on the internet for your Mortgage needs.

  3. The decision to refinance is not made overnight. A number of factors need to be considered first. Thanks to this post, readers are given tips in refinancing, as well as getting ready for a recession.

  4. Vincent Polisi on


    There is a common misunderstanding amongst the greater part of the American population that when the Fed cuts rates, mortgage rates decline. 99% of the time, it is actually the reverse. Mortgage rates that are not tied directly to an index (like Prime, LIBOR, MTA, etc) are tied to mortgage backed securities (MBS), better known as bonds. As I am sure you are aware, there is an inverse relationship (99% of the time) between stocks and bonds. When the Fed cuts rates, unless it is too little too late, it will send a signal to Wall Street that they can be confident of a bailout. As a result, the stock market should rise. When you see huge gains in the DOW it is because investors are unloading their positions in bonds to invest in stocks. As a result, mortgage backed securities get devalued and mortgage rates RISE. The inverse is also true. So, when the FED raises rates, almost assuredly, all of the 3/1, 5/1, 7/1, 10/1 ARMs and 15 and 30 year fixed rate mortgage rates will rise, not fall. When the FED lowers rates, you will see the Prime rate cut shortly thereafter. Prime is what most home equity lines of credit (HELOCs) are tied to, as well as builder construction lines. LIBOR will tend to track PRIME quickly, MTA will lag behind.
    So, if someone is considering refinancing and they believe that the FED is going to cut rates again, the best advice for them to save money is to either lock their rate in a week or more BEFORE the FED cut (typically if a FED rate cut is foreshadowed the stock market already has it priced in by the time of the cut) or, to wait until several weeks after the FED rate cut to allow the bond market to correct and most rates to hopefully drop. Under very rare circumstances should someone lock their rate the day of the FED cut as it typically will result in them getting a higher rate than they could with proper planning. An easy way for your readers to understand what is happening with rates daily (as they are in constant flux every day the bond market is open) is to identify what the stock market is doing. Generally speaking, if stocks are up, mortgage rates are up and if stocks are down, mortgage rates are down. Obviously, we could continue this to discuss the impact of the inverted yield curve on the current rate environment but it would be a waste of time. Rates are still at historic lows and with proper planning, people still have an ability to take advantage of an incredible opportunity.

  5. Vincent Polisi on

    Ok, I had a typo, where it says, “So, when the FED raises rates, almost assuredly, all of the 3/1, 5/1, 7/1, 10/1 ARMs and 15 and 30 year fixed rate mortgage rates will rise, not fall.”, it should read that that when the FED cuts rates mortgage rates will rise, not fall.

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