Dear James,
I’d like your advice. We live in a house on five rural acres in Wisconsin. It’s both our year-round house and a sorta retreat. We now have the chance to refinance our mortgage at a lower interest rate. (Just 3.88%, as oppose to the 5.2% on our existing mortgage.) Our outstanding balance is about $210K. Should we re-fi, or stand pat? Any special considerations, given the perilous economic times, these days? Thanks in advance for your advice. – Hal K.
JWR Replies: Yes, this might be an advantageous time to re-finance. A 3.88% rate is excellent. Just beware that though we are still in a deflationary overhang, it isn’t likely to last much longer. Once inflation kicks in, then variable interest rate loans will become a killer. So I recommend that you ONLY take a fixed rate mortgage, and that you make sure that the terms of the new mortgage agreement allow you to pay off chunks of the principal with no prepayment penalty.