Marry The Dumb House, Date The Stupid Rate

We’ll get the latest on housing in a minute. It’s high humor. Trust us. 

But first —

The other day, The Juice said:

By a show of hands, how many people think the market claws back most of its losses by the end of the week? The Juice raises its pulpy little fingers in the affirmative.

We also said:

So today’s nickel worth of free wisdom: If you have a long-term time horizon, this is definitely a buying opportunity. If you’re a little skittish, maybe go lighter on the high flyers and opt for relative high flyers that pay solid dividends. Like Microsoft. Or even Apple.

As of Friday’s close, the S&P 500 (as measured by the SPY ETF) was barely below where it ended the prior week. Over the five days from Friday’s close, SPY was up 4.3%. 

As for last week’s performance of the two individual stocks we called it and a few others:

• Microsoft (MSFT): +4.4%
• Apple (AAPL): +8.8%
• Amazon.com (AMZN): +8.3%
• Meta Platforms (META): +14.9%
• Nvidia (NVDA): +13.8%

Go figure! A great time to buy was when all hell was breaking loose. 

But—

Is it a great time to refinance a mortgage?

Please let us know if we’re missing something here. Use the feedback link at the bottom of the page. Because this seems nonsensical to us. 

The Juice has long hated the toxic marry the house, date the rate advice some realtors have been given homebuyers these last few years. The idea is that you bite the bullet and buy a home with a relatively high interest rate mortgage, then when rates come down, you refinance and lower your monthly payment. 

So, for example, you bought at 7% around March 2023 when we published the newsletter at the first link. Or you bought at 7.5% around April 2024 when we published the newsletter at the second link. Or, even worse, you bought in between those two Juices at a very pulpy 8.0%. 

Now, with the 30-year mortgage interest rate down to approximately 6.5%, it’s time to refinance? 

Apparently. 

Last week, refinance applications increased 16%. And they’re up 59% year over year. 

Let’s start with some all else equal math. All else equal is important here. Not only because, in many places, home prices have increased over the period. But, we just want to make a basic illustration to sort things out and solicit your thoughts. 

Monthly payment, $700,000 home, 10% down, at various rates, with tax/insurance

So, on a new home purchase, we’re talking a variation (a “savings”) of between $218 and $641 per month between 8.0% and 6.5% mortgage rates. 

From here, we used Bank of America’s refinance calculator to see how much the person would be saving if they bought that $700,000 property at 8.0% in October 2023 and managed to refinance today at 6.67% (that’s the rate BofA gave us). 

Mind you, they’re refinancing $624,737 because, after a year, they barely made a dent in their $630,000 loan ($700,000 minus a 10% down payment). 

Here’s how it looks straight from the bank:

• Current monthly payment: $5,845.00
• New monthly payment: $5,427.86
• Estimated payment savings: $417.14
• Monthly Principal & Interest: $3,897.55
• Property Taxes: $1,146.00
• Homeowners Insurance:$233.33
• PMI: $150.98
• Total monthly payment: $5,427.86
• Interest rate: 6.375%
• APR: 6.673%
• Closing costs: $12,897.56

So, you save $400 a month and pay nearly $13,000 in closing costs. It will take you nearly three years to recoup the closing costs in this scenario. 

This is merely one calculation based on many possibilities that might or might be available from BofA and other lenders, but The Juice asks you: Is this even possible? And, if so, is it worth the trouble? 

Of course, we have our own answers to these questions, but, with a little obvious bias thrown your way, we want to open it up to you. Especially if you have some experience with refinancing. 

The Bottom Line: As we wait to see what you think, here’s a bit more of what we think. 

The Juice thinks that old dreams and habits die hard. It feels like Americans who have seen generations before them become homeowners with relative ease refuse to give up the dream. Maybe they feel entitled to it. But the reality is we’re living in a different environment. 

A lot of this math means people are stretching and scrimping when they could be using their money to put themselves in a position of financial strength rather than going into a building and begging a banker to help them save a few pennies every month.

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