Launch Your Own Fiscal Stimulus Package: Refinance a Mortgage
By Richard BarringtonLocal Lender Columnist
Apr 23, 2008
Although Utah has enjoyed one of the nation's strongest economies, the national slowdown has begun to drag on even Utah's robust growth. Whether this tips over into recession or merely becomes a period of sluggish growth remains to be seen, but there is something many homeowners can do to stimulate their personal finances--and possibly even help out the economy at large.
Lower interest rates are enabling more and more homeowners to refinance their mortgages. This may be just the budget booster that our economy needs.
Slowdown and Stimulus
Significantly, as in the rest of the country, a significant source of Utah's economic weakness is its housing market.Permits for new home construction are down sharply, while unemployment claims in the construction sector have seen a steep rise over the past year. These unemployment claims increased 69% from December of 2006 to December of 2007. This contributed to a rise in Utah's unemployment rate to 3.2%--still well below the national figure of 5.0%, but moving in the wrong direction.
Meanwhile, "fiscal stimulus" was the phrase on everyone's lips in Washington, as lawmakers and policymakers sought ways to put a little extra money in the public's hands, so they would start spending again.
One idea that is quickly gaining momentum is a rebate for some taxpayers. This has the dramatic effect of literally putting a check in some people's hands, but it remains to be seen who will qualify and how long this will take.
Meanwhile, another form of economic stimulus was seen in the form of falling interest rates. The marketplace tends to lower interest rates when concerns about a slowing economy predominate, and the Federal Reserve is acting to lower its interest rates to provide monetary stimulus.
The Opportunity to Refinance
Mortgage rates are among the market interest rates that have fallen significantly. Thirty-year mortgage rates are now down a full percentage point since last June, and they are quite low on an historical basis. This creates an immediate opportunity for many mortgage holders to refinance.Refinancing at a lower interest rate saves money over the life of a mortgage, and this shows up in the form of a lower monthly payment. Alternately, mortgage holders can keep their monthly payment the same and take a little extra cash out when they refinance at a lower rate. Either way, this means increased spending power at a time when many people need it the most. In other words, this is fiscal stimulus package people can get today, without waiting to see what the government will do for them.
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About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.