The Best Time to Refinance a Mortgage

Troy Langeness, Vice President—Residential Lending

Troy LangenessToo often, homeowners refinance in reaction to interest rate levels, assuming that if rates are low or about to rise, it’s a good time. But, it may not be the best time.

For that, the determining question should be: Is now the right time for your circumstances? Because when it comes to refinancing, it’s not really about the current level of interest rates as much as it is about what you personally will accomplish by pursuing one.

What a Refinancing Can Do for You

Refinancing has a cost—generally adding up to several thousand dollars. This is why you should work with a lender to make sure going through the process will be worth the expense.

The basic rules of thumb for determining that include your intention to live in your home for at least four to five years and, when the numbers are crunched, that the refinancing will either literally pay for itself within 18 months or help you achieve some other financial goal.

These goals could include:

  • Shortening the pay-off period for your home so that you will own it free and clear before you retire. This is usually accomplished by replacing a 30-year mortgage with a 20-, 15- or 10-year mortgage.
  • Lowering your monthly payment by refinancing your current home loan balance at a lower interest rate, enabling you to put more money into savings or take on other expenses.
  • Consolidating high-interest debt (such as credit card balances or auto loans) with lower-rate mortgage debt to make monthly payments more affordable and tax deductible.
  • Accessing the home equity you’ve built up over the years to purchase another asset that you might not be able to finance otherwise due to circumstances beyond your control.
  • Eliminating private mortgage insurance (PMI), which is mandatory on loan to values greater than 80 percent.
  • Locking in a fixed rate and retiring an adjustable-rate mortgage (ARM).

Online refinance comparison calculators can help you estimate the benefits of refinancing. But, talking to a lender who will listen, check your numbers and even customize the loan structure to make sure refinancing makes sense for you is highly recommended before you apply.

How To Prepare For a Refinance

Other Considerations

Once you determine that refinancing is right for you, be aware that the approval process for home-based lending has changed dramatically since 2009. Nearly all the changes were made to improve consumer protection. That said, refinancing takes more documentation than it used to.

Even when these loans are handled online, they now require a deeper dive into your credit history. Borrowers are required by the government-sponsored enterprises, including Fannie Mae and Freddie Mac, to do more explaining about their assets, sources of income and any recent money transfers that result in large deposits. These, in turn, need to be documented to establish their paper trails.

Old Second continues to leverage technology to ensure your refinancing is as efficient as possible. We accept applications online, face to face or by phone and offer the option of electronic signatures on many of the documents.

If you think a refinancing would help you accomplish your financial goals, call us. We’re always happy to talk it through and create the right loan structure for your situation.

Wealth Management Economic Update April 25, 2016

U.S. and World News

  • Looking to stave off impeachment proceedings, Brazilian President Dilma Rousseff will travel to the United Nations in New York to rally international support around her. While there, Rousseff will attempt to frame the recent votes by the Brazilian congress to move forward with impeachment as a coup. If the Senate in Brazil votes by simple majority in early May to continue with impeachment, Rousseff will be suspended from her post and replaced by VP Michel Temer. Prior to Rousseff, four of Brazil’s eight presidents since 1950 have failed to serve out their terms, with one impeachment, one resignation, one suicide and one military overthrow.
  • argentina_congress340Argentina has officially returned to the global bond markets following a 15 year hiatus. The country unveiled the biggest sovereign debt issuance by an emerging market nation in 20 years. The country is selling $15 billion in bonds yielding between 6.5% – 8%, however demand was strong, attracting orders worth $65 billion. Most of the cash raised will go toward paying off creditors from Argentina’s previous default, the reason for the 15 year hiatus.

Markets

  • Equity markets continued to climb higher this week. The S&P 500 gained 0.53% and closed at 2,092. Likewise, the Dow Jones rose 0.62% and closed at 18,004. So far in 2016, the S&P is up 3.02% and the Dow is up 4.16%.
  • Interest rates turned higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.36% and 1.89%, respectively.
  • The spot price of WTI Crude Oil rose 8.33% this week to close at $43.72 per barrel. This, despite an OPEC summit in Doha, Qatar last weekend that yielded no change in policy.  WTI Crude is up 9.36% in 2016.
  • The spot price of Gold was virtually unchanged this week, closing at $1,233.61 per ounce. Year to date, gold prices are up 16.26%.

Economic Data

  • Initial jobless claims came in at 247,000 which was a decrease from last week’s reading of 253,000. The Labor Department noted no special factors in the data. This was the lowest level of initial claims since 1973. The four week moving average for claims moved down to 261,000.
  • Housing starts declined by -8.8% in March, worse than expectations of a -1.1% decline. Single family starts declined -9.2% and multifamily starts fell by -7.9%.
  • Existing home sales increased 5.1% in March, beating expectations of 3.9%. The gain marks a big bounce back from the -7.3% decline in February.

Fact of the Week

  • 25 years ago, 89% of American workers expected to be retired by at least age 65. Today, only 57% of American workers expect to be retired by 65. (Source: Employee Benefit Research Institute)

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

Wealth Management Economic Update April 18, 2016

U.S. and World News

  • Legislators in Washington D.C. have begun working towards a solution for Puerto Rico’s $70 billion debt burden, though the process is not expected to move smoothly due to partisan bickering. Plans are to unveil a bill that would create a seven member oversight board appointed by President Obama as well as create collective action clauses, which would separate creditors into different pools and allow them to vote on modifications to the debt. The proposal stops short of giving Puerto Rico broad bankruptcy authority, forcing the island to work with Washington to find a solution.
  • Brazil’s lower house of Congress has voted to recommend President Dilma Rousseff’s impeachment for allegedly manipulating public finances. Further votes are expected this weekend that could continue momentum for her ouster. If the proceedings reach Brazil’s Senate, the chamber could decide by simple majority to put Rousseff on trial, which would suspend her position for up to six months, requiring Vice President Michel Temer to become acting president.
  • A U.S. appeals court has cleared the way for Argentina to raise as much as $15 billion to pay holdout creditors whom had loaned the country money in the past. The ruling would allow Argentina to re-enter the international capital markets for the first time in more than a decade following a default on its debts in 2001. This marks another victory for President Mauricio Macri, who has been diligently been negotiating with the country’s creditors since he was elected last year and has already passed a number of economic and financial reforms.

Markets

  • The markets rose this week as 1st quarter earnings reports started coming in. The S&P 500 gained 1.62% and closed at 2,081. Likewise, the Dow Jones rose 1.82% and closed at 17,897. So far in 2016, the S&P is up 1.80% and the Dow is up 2.71%.
  • Interest rates turned higher this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.21% and 1.75%, respectively.
  • The spot price of WTI Crude Oil rose 1.76% this week to close at $40.42 per barrel. WTI Crude is up 1.10% in 2016.
  • The spot price of Gold declined 0.53% this week, closing at $1,234.08 per ounce. Year to date, gold prices are up 16.30%.

Economic Data

  • Initial jobless claims came in at 253,000 which was a decrease from last week’s reading of 267,000. The Labor Department noted no special factors in the data. This marks 58 consecutive weeks of initial claims below 300,000, the longest streak since 1973. The four week moving average for claims moved down to 265,000.
  • The headline Consumer Price Index (measure of inflation) rose 0.1% in March, below expectations of a 0.2% gain. Over the last 12 months, overall inflation has risen 0.9%, which is lower than the forecasted 1.0%.
    • Core CPI (excludes food and energy) increased by 0.1%, which was also below estimates of 0.2% gains. Core prices have now risen 2.2% over the last 12 months.
  • Retail sales declined -0.3% in the month of March, missing estimates of a 0.1% gain. A 2.1% decline in motor vehicle sales and 0.9% decline in clothing purchases were largely responsible for the miss.
  • The University of Michigan’s index of consumer sentiment dropped to 89.7 in April compared to 91.0 in March, and against consensus expectations for a minor increase. The decline was mainly driven by a lower assessment of both current conditions and consumer expectations.

Fact of the Week

  • The average national price of gasoline fell from $2.26 to $2.00 in 2015. Lower gas prices saved Americans $126 billion in 2015, an average of $1,084 per household. (Source: Financial Times)

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

The Balanced Business

John Gorzak, Vice President

John Gorzak

Businesses, especially smaller private companies, tend to experience performance plateaus over their life cycles. Often, these plateaus are triggered by growth.

Such growth spurts typically lead to an expansion in the ranks of management, along with a redefining of roles and responsibilities among the executives and founders who have been with the firm the longest. At the same time, owners may also feel pressured to delegate more and incorporate better tools for evaluating production and financial management. However, they may find it hard to let go or figure out how to implement them. Meanwhile, existing scorecards and other means of measuring performance can break down as communication among the new layers of management compromise preexisting checks and balances.

OSB-0052_Gorzak-Sidebar1

In the end, the amount of change needed, and determining its nature and how best to implement it, can lead to stalled growth.

Fortunately, as growth starts to stall it produces symptoms. If management knows to be on the lookout for these early warning signs, they can proactively address them and their underlying causes to bring the business back into balance before any sustained damage can occur.

Resources for Counteracting Stalled Growth

Among the most effective ways of spotting and counteracting the symptoms of stalled growth is to seek perspective and actionable advice by joining groups of business people in different stages of facing similar issues.

In this area, Vistage, Young Presidents’ Organization (YPO), Executive Forums and local trade groups, like the Technology and Manufacturing Association and the Valley Industrial Association, are all good options. In fact, many of our customers have found these organizations’ forums have enabled them keep their growing companies on track.
OSB-0052_Gorzak-Sidebar2Another effective means of protecting the financial balance of your firm while enjoying revenue growth is to establish a framework of standards to gauge performance and the effectiveness of internal communications. There are many resources to choose from, but our clients have found the books listed in the accompanying box to be particularly impactful in the areas of:

  • Improving communication
  • Effectively delegating
  • Learning to measure the right things
  • Incorporating the flexibility to keep modifying

In addition to these resources, the commercial bankers at Old Second also stand ready to help you spot the early warning signs of stalled growth and address them. With a range of cash management tools and credit structures, we can work with you to maintain balanced growth in your business.

Wealth Management Economic Update April 11, 2016

U.S. and World News

  • papers_000071022187_320Details from the Panama Papers, 11.5 million documents leaked from Panama-based law firm Mossack Fonseca, have been causing a stir across the globe with details of corporations and wealthy individuals utilizing offshore shell companies in order to hide funds from authorities. The first casualty from the bombshell documents was Iceland’s Prime Minister, David Gunnlaugsson, who resigned after the leak revealed his wife’s ownership of a shell company set up in the British Virgin Islands. Several other high profile people and world leaders are named in the documents, including President Macri of Argentina, President Poroshenko of Ukraine, King Salman of Saudi Arabia and soccer star Lionel Messi. In the wake of the Panama Papers leak, the U.S. Treasury Department announced that it finally intends to issue a long-delayed rule forcing banks to seek the identities of people behind these types of shell-company accounts.
  • Minutes released from the March Federal Reserve meeting were in line with the post-meeting statement and Janet Yellen’s most recent public remarks. Policymakers saw downside risks to growth stemming from developments overseas and in the credit markets. Several members also expressed concern about low inflation both in the U.S. and abroad and deemed that a more cautious approach to interest rate policy was warranted.
  • Puerto Rico Governor Alejandro Garcia Padilla has signed an emergency bill allowing the government to stop debt payments until January 2017. The action throws the current restructuring plans for the U.S. territory into doubt. Creditors claim that the moratorium on debt payments violates prior agreements as well as the island’s constitution. The action buys the Padilla administration some time and increases pressure on Congress to help Puerto Rico find a way out of its $72 billion in debt.

Markets

  • Markets slumped a bit as the 2nd quarter of 2016 kicked off. The S&P 500 fell 1.15% and closed at 2,048. Likewise, the Dow Jones dropped 1.15% and closed at 17,577. So far in 2016, the S&P is up 0.78% and the Dow is up 1.58%.
  • Interest rates continued to fall this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.15% and 1.72%, respectively.
  • The spot price of WTI Crude Oil rose 7.45% this week to close at $39.53 per barrel. WTI Crude is down 1.13% in 2016.
  • The spot price of Gold increased 1.44% this week, closing at $1,240.14 per ounce. Year to date, gold prices are up 16.87%.

Economic Data

  • Initial jobless claims came in at 267,000 which was a decrease from last week’s reading of 276,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved up to 267,000.

Fact of the Week

  • For every 100 American workers, there are 24 retired Americans age 65 or older. By contrast, for every 100 European workers, there are 42 retired Europeans age 65 or older. (Source: European Commission)

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

Wealth Management Economic Update April 4, 2016

U.S. and World News

  • In a speech at the Economic Club of New York, Fed Chair Janet Yellen emphasized downside risks to the U.S. economic outlook which derive from slower global growth. On inflation, Yellen acknowledged the recent uptick in core prices but said it is “too early to tell if this recent faster pace will prove durable.” The dovish comments follow the decision earlier in the month by the Fed to leave interest rates unchanged and lower its forecasts for future hikes.
  • turkey_istanbul_360The European Union will start implementing its controversial plan for asylum seekers on Monday by transferring the first group of migrants back to Turkey. Under the deal, EU countries have pledged to take in one screened refugee directly from Turkish soil for each Syrian refugee returned to Turkey. In addition, Turkey will receive nearly $7 billion and other concessions to help the country stem the migrant tide and deal with the 2.7 million Syrians currently living in the country.

Markets

  • Markets resumed their rally and finished the 1st quarter on a positive note. The S&P 500 gained 1.84% and closed at 2,073. Likewise, the Dow Jones rose 1.58% and closed at 17,793. So far in 2016, the S&P is up 1.95% and the Dow is up 2.76%.
  • Interest rates moved down this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.23% and 1.78%, respectively.
  • The spot price of WTI Crude Oil fell 7.05% this week to close at $36.68 per barrel. WTI Crude is down 8.25% in 2016.
  • The spot price of Gold increased 0.40% this week, closing at $1,221.95 per ounce. Year to date, gold prices are up 15.16%. 

Economic Data

  • Initial jobless claims came in at 276,000 which was an increase from last week’s reading of 265,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved up to 263,000.
  • The monthly non-farm payrolls report showed 215,000 jobs added in March, beating estimates of 205,000. With only modest backward revisions, the three month average for job gains now stands at 209,000.
    • Despite the strong job gains, the headline unemployment rate ticked up 0.1% to 5.0% which was higher than expected. This was mostly due to a 0.1% increase in the labor force participation rate which now stands at 63.0%. The participation rate has now risen 0.6% since September.
    • Average hourly earnings rose 0.3%, more than the expected 0.2%. Wage growth over the last 12 months now stands at 2.3%.
  • The Case-Shiller Home Price Index rose 0.8% in January, better than expectations of  0.7%. All 20 cities in the index showed gains in home prices for the month. Over the last 12 months, home prices as measured by the index have risen 5.8%.
  • The headline PCE Index (measure of inflation) declined by -0.1% in February, in line with expectations. Headline prices have only risen by 1.0% over the last year, being dragged down by slumping energy prices.
    • The Core PCE Index (excludes food and energy, Fed’s preferred measure of inflation) was up 0.15%, slightly below estimates of 0.2%. Over the last year, core prices have risen 1.7%, lower than the forecast of 1.8% and the Fed’s target of 2.0%.

Fact of the Week

  • According to the Social Security Administration, 35% of American men and 40% of American women elect to take their Social Security retirement benefits at age 62, the earliest age a worker can access those benefits. Those who do take benefits at 62 are taking a permanent 25% discount to what the benefit would be at full retirement age.

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Tamara Wiley, CFP® – (630) 844-3222 twiley@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.