Clark Howard's Tips

Lower interest rates open refinancing window

May 23, 2008

The slowing economy presents many challenges along with many opportunities. In a reprised edition of Clarkonomics, Clark focused on some of the latter.

The Fed's drop in interest rates has led to an opportunity to refinance. Here's the back-story: People who are skittish about the stock market right now are instead putting money into U.S. treasuries, which are like CDs for rich people. Clark recently saw a 10-year treasury trade going for around 3.6 percent. That low rate in turn affects what you pay for a mortgage.

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Let's look specifically at how Countrywide is helping to make refinancing a smart move. The mortgage lender had gotten into all kinds of trouble with their undesirable liar's loans and option payment loans, which they hoped to sell off to investors. But there are no buyers willing to take the risk in these tough economic times. So Countrywide is stuck with them. The Los Angeles Times reports that right now the mortgage lender may be willing to work with you if you're in one of their weirdo, exotic loans. They'll waive all kinds of requirements to get you into a good loan. Their goal is simply to package you up with other "safe" loans and sell you off to investors.

So keep asking what you can do to get into a better loan -- even if you've been turned down before. Meanwhile, what do you do if this scenario doesn't apply to you because you're in a relatively good loan? The Fed's interest rate cut still means that you may have the opportunity to refinance for an even better rate.

More Clark Howard Credit and Banking Tips The dangers of home-equity borrowing  ID checks, minimum purchase rules a no-no with credit cards  The Mortgage Lender Implode-O-Meter  Advance-fee loans are back with a vengeance  Wachovia, WaMu say goodbye to option payment loans  Cycling your unused credit cards back into the mix  Banks offer diverging interest rates on savings and CDs  Mortgage bailout proposal to help banks, not homeowners  Credit limits being reduced without your knowledge?!  65 million paying for credit monitoring/fraud alert services  Full list