February 26, 2021
Refinance Issues | Does It Makes Sense to Refinance for Lower Rates?
In this episode, Chris shares his insights on refinancing your mortgage, is this a good time to refinance your mortgage? Does it make sense to refinance for lower rates?
Learn about Refinance issues on this episode of Daily Wisdom!
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Episode Transcript
Refinancing to Get a Lower Rate
A lot of people are refinancing right now due to all of the low-interest rates. It’s a great time for that, where I’ve had some people with interest rates on their mortgages as low as 2.75%. Where it becomes interesting is when we have trusts and with a trust, a lot of times your mortgage company is not going to allow you to refinance inside of a trust. So let’s say we have something like a Castle Trust, which is our asset protection trust. So let’s say we have that Castle Trust and now you want to refinance to get a lower rate and let’s say the house is inside of the trust. Well, some refinance companies or mortgage companies will not refinance inside of the trust. So sometimes what we have to do is we have to take the trust or the house out of the trust, do the refi, and then put it back into the trust.
Five-Year Clock Restart
The downside of that is if we are taking outside of an asset protection trust, like the Castle Trust, it will restart that five-year clock for a nursing home or Medicaid protection. So we have to weigh, does it make sense to refinance for that lower rate? Understanding that we might restart that five-year clock if we do have an asset protection trust like a Castle Trust. Now, if we just have a basic revocable living trust and the house is in that, and we take it out, we do the refi and then we put it back in, no downside to that, okay? So that’s where with a revocable living trust, it’s a little easier to navigate, but with a revocable living trust, you’re missing out on the asset protection. And understand each mortgage company is a little bit different on that. And we do have some mortgage companies that will refinance with the house in the trust.
Considering Alternatives
Sometimes it might be at a slightly higher rate, but there is a possibility. But what I want you to understand is every mortgage company, it’s a private entity and they can choose what they want to work within terms of whether they want to work with refinancing in a trust or not. But something really to consider with the low-interest rates we have. We’ve had a lot of calls on refinancing. Now, along the same lines is with these low-interest rates, it’s really been a tough time in the bond market. So just something as an aside, if you have money in the market and you’re following that 60/40 rule of maybe 60% in equities, 40% in bonds, understand that bonds are really underperforming right now. And I sent out a Forbes article that talked about how if you are following that 60/40 rule and you’re looking at bonds as that 40%, maybe you should be looking at some alternatives because interest rates are so low. And that’s good for the refinancing side, but it’s not as good for the portfolio side on the bond side. So hopefully that’s helpful with the refinancing.