Wow! I have to say it again, Wow! 30 year mortgage rates dip again but Ben Bernanke cannot refinance his own house according to the Guardian.
Relax, its not as bad as you think. According to the article, Bernanke is trying to refinance from a rate of 4.25% down to 4.19% but his mortgage is above the conforming loan limit of $625,000 in his neck of the woods. It also goes on to talk about how he commands $250,000 per speaking engagement. The first thing I see wrong with this is that you shouldn’t be refinancing from 4.25 down to only 4.19. There’s not enough benefit to you as a borrower unless the 4.25 was taken out so long ago that by doing a new 30 year fixed you reduce the payments significantly by stretching out the re-payment terms back to 30 years.
The next issue I have is that he wouldn’t be trying to get a 4.19% rate. That isn’t offered. Rates are typically offered in 1/8 point increments. Sometimes lenders will provide a rate slightly under a double zero defying that rule. For example: instead of 4%, they offer 3.99%. It’s like paying $3.99 at the pump instead of $4.00. In addition to that, 4.19% is the average rate on a 30 year fixed mortgage currently. It’s not a target rate you would shoot for.
The last thing that I take issue with is the fact that they’re selling this lke a hardship. Bernanke is probably not in any financial trouble whatsoever so if he can’t refinance his mortgage, well that’s not ideal but not the end of the world. He was simply trying to save money. I doubt that the savings from a refinance would significantly affect his way of life.
The takeaway from the article that I get from reading between the lines is that even though a wealthy, powerful public figure doesn’t need a mortgage at all, he’s wise enough to see that a mortgage makes sense. You get the tax benefit and you don’t have the opportunity cost. If you don’t use a mortgage instrument, much of your wealth is tied up in your home and you don’t have access to it. You can’t make money on it through other financial instruments like mutual funds and IRA’s or fund some other business venture–Some alternative place to put that same money where it works for you. In Bernanke’s case, $625,000 of liquid cash that he could presumably use for some alternative venture. My opinion of course but don’t take my word for it. Read the article from the Guardian yourself at this link Ben Bernanke ran the Federal Reserve and can’t get a new mortgage. Can you?
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30 Year Mortgage Rates Dip Again but Ben Bernanke Cannot Refinance?
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