Edina Realty

The Power of Low Interest Rates In a High Equity Market

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by Kevin Kildahl, Edina Realty Mortgage Consultant – NMLS # -1236759

                This morning on my drive in to the office, I noticed my surroundings in a way that I hadn’t in a while.  The sky was completely overcast in gray without a shred of sunlight, and all I could notice was a small gathering of birds, and how they moved throughout all their open space.  There wasn’t space in my mind to race with other commuters, to see who could beat the other to the next red light.  No quarter for the typical Monday morning anxiety, spent wondering if spending quality time with my wife and kids over the weekend I had left myself with pile of work to start the week.  The only thought that remained, was appreciation for the present moment and the reflection of gratitude.

                So yes, today I am grateful for more than usual. 

I am grateful that I took my son to Husky games on Friday and Saturday night, and through the “Teddy Bear Toss” he was reminded of the full impact of what it means to give, instead of receiving.  I’m grateful that my Mom drove down three hours to watch my 8-year-old son’s first hockey game of the season, and that I made the choice to make time to coach on his team this year, even though my wife and I have never been busier in our careers.  I am grateful that I took my vigorous dog for trail walk through the woods, even though it was him that was walking me, and for much longer than I set out for.  I’m grateful for enjoying our clean house on Sunday evening, that we worked toward all weekend (and by we, I mean 99% my rockstar of a wife, with whom I am incredibly lucky and grateful for).  The list goes on, but for the sake of the article length and your time, I am grateful for how I spent my time over the weekend, as now completely recharged, it gave my eyes the ability to see the good in an overcast day come Monday morning.

                By now, you are probably reading this and wondering, “What on Earth does this have to do with Real Estate or Mortgages?  Get to the point, Kevin.”

                This year, I’m also incredibly grateful for our real estate market and the low interest rates we’ve had.  Although the markets have been moderately frustrating to monitor, with the back and forth of trade progress with China and the market’s consistent ability to quickly overreact to headlines, it has provided my clients with great opportunities for advantageous mortgage structure.  Local home values allowing to sell with enough equity for a sizeable down payment, or reset debt structure paying off all or most non-housing debt, while transitioning into a more suitable home.  Bottom line right now, is that there is equity to sell, there are many eager buyers looking, there are homes available or coming soon, and your payment will be less now than it will be when the rates go back up – and they will go back up at some point.

There has also been great opportunities for many to refinance, ensuring their mortgage aligns with their financial goals.

                Here are a few examples of how it has recently benefited others.

Planning to move in seven-ten years, one family refinanced to a 15-year mortgage from their existing 30-year.  With the way the new loan is amortized, they will come out with two-three times the equity they would have when the time is right to sell.

Some of course, are taking their lower interest savings to help with their current budget, by lowering their monthly payment substantially on a fresh 30-year term.

There are also those who want to make home improvements.  Like finishing a basement, remodeling a kitchen or bathroom, or doing an addition.  Wouldn’t it be nice to get those done with time to appreciate them?  By tapping into some equity, and lowering the interest rate on a new loan, you may be able to keep your payment relatively similar, of course varying by how much you take out and how much of a rate difference there is.  I would just caution against tapping equity that doesn’t translate to additional value to your home.

I’ve sat down with many families for mortgage reviews this year, and when there are options to save, they are laid out transparently and easily digestible.  When they are already in a good position, we have discussed plans and goals and I have confirmed their existing mortgage is best for those goals.  Sometimes with finances, the reassurance is invaluable.

Being grateful for what I have keeps my mind in the right place, where I don’t need more than I have, and I don’t need to close a loan that isn’t with full certainty going to benefit.  I’m sure there is a study out there somewhere, that suggests you live longer with gratitude.  If there isn’t, I’m absolutely certain the years you have are fuller, and your presence in the present means everything to you and the people around you while you are here.

Enjoy your holiday season with the people you care for most, and fully appreciate all the moments it brings.  I will part by leaving you two of my favorite quotes.

“As we express our gratitude, we must never forget that the highest appreciation is not to utter words, but to live by them.” -John F. Kennedy

“Realize deeply that the present moment is all you ever have.” -Eckhart Tolle

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