As you read this, the average rate for a 30-year fixed mortgage is 3.36%. That's the lowest the rate has dropped since record-keeping began back in the early 1970's!
OK, so you know that mortgage rates are low -- and are on track to stay that way for quite some time. So, how does this affect you?
If you're a Baby Boomer, it's having a huge impact!
According to AARP, people in their 50's, 60's, and 70's are carrying around tons of debt. Amazingly, a recent report from the National Center for Policy Analysis said that 15% of all Baby Boomers will never get out of debt in their lifetimes. While their median amount of debt has been rising steadily for the past couple of decades, it has risen sharply since the recession began -- due in large part to the fact that so many of them lost so much home equity when the bubble burst.
What makes Baby Boomers different from Americans in any other age group?
While all Americans are carrying around more debt than they were just a few years ago, the Baby Boomers were arguably the hardest hit by the recession. After all, they're either about to enter -- or have just hit -- retirement age. The kids are grown, and college has been paid for. This was supposed to be the time when they could kick back, sell their big home, downsize to something smaller, and live comfortably off the profits (like so many generations before them).
However, that's not happening.
Historically, older Americans sold their big family-sized homes to younger Americans -- the ones who were just starting out as adults and wanted a place to raise kids. However, with so many 20- and 30-somethings struggling to find work, settling for low salaries, and suffocating under huge student loan debt burdens, there are considerably fewer younger people to sell to. Today, the average age of first-time homebuyers is 35. Back in 1985, it was 28.
Not only are there fewer younger buyers, more and more Baby Boomers have their grown children living with them. In fact, more than 50% of 18-24 year-olds and nearly 30% of 25-34 year-olds live with their parents because of the economy. As a result, the traditional process of downsizing and living off the profits of that giant family-sized house isn't happening right now.
So, what's the solution if you're a Baby Boomer?
After all, you're probably paying far more in interest than you need to. By taking advantage of today's mortgage rates, you may be able to save yourself thousands of dollars every year!
But there's a catch.
Before you get all excited over significantly smaller monthly mortgage payments, remember that refinancing resets your clock. You'll be getting a new 15- or 30-year mortgage, so if you only have a few years to go on your current loan, it's not a wise move. Sure, you'll get to take advantage of a much lower rate, but you'll wind up paying interest for years longer than you have to.
Even if you've done all the research and refinancing makes perfect sense, there's still one thing could be standing in your way -- your equity.
Today, refinancing standards are tougher than they were years ago. The exact rules will depend on your specific lender, but count on needing at least 5 or 10% of equity in your home to qualify for a refinance. That may not sound like much, but remember, Baby Boomers lost a lot of home equity when the bubble burst. Today, many of them are completely underwater!
What's the bottom line?
If you're a Baby Boomer, the situation isn't hopeless. Today's mortgage rates are so low that there's got to be SOMETHING you can do to take advantage of them. With a little bit of research, you should be able to find a solution.
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