Most times when you hear an advertisement that sounds “To good to be true”, it usually is, but not in this case.
For the last 10 or so years, my current home loan was at 3.75%, arguably a very good rate. However when the pandemic hit around March of 2020, I could tell by the rapid drop in interest rates that this would be a good time to refinance. I figured my window of opportunity would be short lived, but I was wrong.
I immediately went to work, searching out what lenders could get me an interest rate below 3%. I had one ace of up my sleeve, my financial situation and years left on my existing loan would allow me to opt for a 15 year payoff rather than the traditional 30 year payoff. This would significantly help drive down the rate. My first choice was to check with Wells Fargo, but the best they could do at peak pandemic time was 3.125%. I did however find a surprise credit union, Golden1, that was offering 2.75%. I immediately provided them with all of my paperwork and locked in a 2.75% 15 yr loan. It took a long time to process the loan, as lenders have been overwhelmed, but they honored the rate and eventually funded my new lower shiny 2.75% 15 year loan.
That was a little over a year ago. While I would have expected rates to rebound quickly, as the stock market recovered, rates continued to stay low and drift lower. Often while driving around Long Beach I listen to KFI radio. One of the consistent advertisers on the radio station has been Owning.com. Their usual ad has been for a 15 year 1.99% loan. Now I don’t know about you, but just thinking of a historical prospective of interest rates, this 2% number just sounded absurd. Absurd enough for me to simply just discount it as “To good to be true”. 
Just thinking back on the history of interest rates, I think of my parents home they bought in 1962, and they got a 4% interest rate. Being a child of the inflation ridden 80’s, we just knew that even a 4% rate would never be seen again in our lifetime. When I got into real estate most everybody obtained adjustable rate loans at around 6% because the alternative was around 10%+ on fixed loans. So 4% has been a ridiculously good rate and 2%, well that just seems too good to be true.
Well I can tell you, that last week loan docs were signed and today, the loan funded the refi is complete. Dropping from 3.75% to 2.75% saved me $6,000 per year on a $600,000 loan. Now 2% will save me an additional $4,500 per year. While personally, I am happy to be saving money and paying my loan down quicker, these low rates has me concerned about the stability of our country’s currency. Let me explain.
The cost to rent a product is based upon the value of the product. Renting a cheap economy car may only cost $50 per day. A Ferrari might cost $400 per day. The cost of renting money is the interest rate paid. Well if I am borrowing money at 2%, what does that say about the value of the money I am borrowing. It says that the US dollar is becoming worthless.
Time will unfold and the future of our currency’s stability will become clearer. For now, those who are purchasing homes at record high prices with very low interest rate loans maybe on the right side of the trade.