Low Mortgage Interest Rates: It’s Smart Business

You can take a cue from the world’s leading CEOs

what are mortgages, 20 year vs 30 year mortgage

Do you own a house with substantial equity in it? Have you thought about a mortgage — or refinancing your present mortgage?

Well, let me tell you about someone who is thinking about refinancing. His name is Jack Ma. He’s the chairman of Alibaba — a massive internet commerce company that some are calling “the Amazon.com of China.”

Alibaba’s stock is worth $43 billion as of this writing; the company has $7 billion in cash and another $17 billion in other assets. Despite this, Alibaba has launched a bond sale to raise $8 billion.

Why would a company with $7 billion in cash want to borrow $8 billion more?

I’ll tell you why. It’s because the loan will cost the firm only about 3% in interest. Clearly, Ma believes the firm can earn more on its cash and other investments than the loan will cost it. That’s smart business.

You have the same opportunity: You can get a mortgage against the equity in your home at a cost of about 4%, and lock in that low rate for 30 years.

Corporations around the globe recognize that today’s low interest rates aren’t going to last much longer, so they’re locking in the rates while they can. If the smartest CEOs on the planet are doing it, why aren’t you?

If you haven’t considered obtaining a mortgage or refinancing yours lately, talk to us to see if the idea is right for you.

Originally published in Inside Personal Finance March 2015

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