Interest Rates and You: This is the time of our lives

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If you have a mortgage of any kind, refinance it now.

We are living in unprecedented times and now is the time to find your mortgage statement, whether commercial or residential, call your bank, and see if you can lower your rate for little or no cost.

These are times we will most likely never see again in our lives. One of the largest expenses in your personal or professional life is probably your mortgage. The rule of thumb is if you can lower your rate by a percentage point (from 5% to 4% for example) and plan to hold the asset you are refinancing, it is probably a good idea.

There are always mitigating factors: how long you plan to hold the asset, how much cash do you have on hand... but my point takes these out of the equation.

Ask your bank if there is a no cost option to refinance and some banks will acquiesce. If there are no closing costs to refinance your mortgage, then the equation becomes much simpler. Can you simply lower your current rate? Sounds so simple, but not enough people simply ask their bank if a no, or even low cost, option to refinance is available. Since mortgage rates are at historical lows, it would be foolish not to simply have that conversation with the mortgage holder.

Why are these such unprecedented times?

Both Europe and Japan have ventured into negative interest rate territory. Stay with us here:

Negative interest rates are really not that complicated. Simply, the central bankers are penalizing the banks for holding/hoarding cash. So, in turn, the banks will now charge depositors to hold their money. As ludicrous as that sounds, the idea is, again, based in a simple rationale: if people/lenders are charged to have their money held safely, they then will instead put that money to work. The consumer will spend it, or invest it and the bank will give out money in terms of a loan or investment, thus spurring the economy.

While totally messed up (obviously a very technical term), that is what the central bankers of Europe and Japan have already done; and now Ms. Yellen has said that negative rates are "on the table" for us here in the US.

The banks' fear is that if they charge depositors to hold their money, the depositors might pull their money out of the bank and place it under their collective mattresses. If people are conservative (errr, responsible) enough to have this cash on hand, why wouldn't they pull the money out of a place that is charging them simply to hold their money? This flight to safety could cause the banks to lose customers, but more importantly for them... profit. If taken to extreme levels where no trusts the banks (and there are many historical examples of which none are positive), then we are in for a lot of pain.

But... we digress.

So, on a lighter note, while we are not trying to be the harbingers of doom, we are simply saying these are glorious times for mortgage holders. We all need to find our statements and ask our bankers for a no cost refinance. If your banker gives you tepid response, shop around with a loan search tool such as Magilla.

The low interest rates environment of today are truly the time of our lives.

This post originally appeared on The Whole Magilla and was co-written with Chris Meyer, co-founder of MagillaLoans.com.

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