Read This Before You Refinance Your House

Realtors always warn you “You’d better act now before rates go up.”

You might think they’re right… After all, US mortgage rates are the lowest they’ve been since the Fed started keeping records in 1971. But interest rates could go much lower.

America’s problems came to a head in 2007. Since then, the Fed has cut interest rates from over 5% to near zero. As I’ve written before, it looks a lot like Japan…

In the 1980s, Japan had an overlending bubble similar to ours today… Its bubble peaked in 1990. Japan’s version of the Fed cut rates from above 5% to below 1% - and it’s held them there ever since!

Japanese mortgage rates are extremely low - less than 3% - and have been for a very long time. The brutal reality is lower mortgage rates haven’t enticed the Japanese people to borrow. They were burned so badly in the bust that started in 1991, they still haven’t ventured back in.

So don’t refinance today just because a realtor or a mortgage salesman convinces you rates are going up. Think about it… The last person you want to get your interest-rate forecast from is your real estate agent!

It’s Ben Bernanke’s goal to stimulate the economy at all costs… He’s not going to raise rates until he’s absolutely certain he’s gotten the economy going again. And it’s Obama’s goal to get interest rates down, too… to make mortgages more affordable. So lower rates could be coming.

Here’s a strategy for you: If it makes financial sense for you to refinance, get an adjustable-rate loan today… and let it ride as long as Bernanke is keeping rates this low.

Then, the day Bernanke hikes rates for the first time, switch it to a 30-year fixed-rate loan as quickly as you can. Bernanke’s rate hike will be the signal that inflation is here. Lock in at a low 30-year mortgage rate at that time, before inflation hits.

That day could be years from now. Remember Japan’s example: Interest rates can go lower than anyone can imagine and stay there longer than anyone can imagine.

If it works out right, in 10 years, you could end up with a mortgage rate that’s lower than the rate of inflation!

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