Should you refinance your mortgage?

by Shelton on February 24th, 2015

filed under Debt Consolidation

Yahoo Finance is answering your most-searched finance questions of the year. The fourth most-searched questions was: Should I refinance my mortgage?

There are a few solid reasons to refinance your mortage. If interest rates are lower than they were when you first financed, you may want to move fast to lock in that lower rate.

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A lot of people also refinance their loan by cashing in on equity in their house in order to pay down debts — basically like a debt consolidation loan.

Another reason to refinance is if you’re looking to change the terms of your loan. For example, you might want to switch from a 30-year loan to a 15-year loan or from an adjustable rate mortgage to a fixed rate mortgage.

But before you pull the trigger, don’t forget that a new mortgage also means new closing costs. Sit down with a financial planner to figure out how many months of lower mortgage payments it will take to recoup those costs before you refinance.

Have a personal finance question you’d like answered? Drop us a line at

More of your top finance questions answered:

Number 5: Can you buy a house with bad credit?

Number 6: Should you buy Facebook stock?

Number 7: Why are gas prices going down?

Number 8: Who is the richest man in the world?

Number 9: Is social security taxable?

Number 10: What is Bitcoin and how does it work?

Moody’s places Greece’s Caa1 govt bond rating on review for downgrade

by Shelton on February 24th, 2015

filed under Debt Consolidation

Moodys Investors Service has today placed Greeces Caa1 government bond rating on review for downgrade. The short-term rating remains unaffected at Not Prime (NP).

The key driver for the review for downgrade is the high level of uncertainty over the outcome of the negotiations between Greece and its official creditors over the terms of Greeces support programmer. The outcome could potentially have negative implications for Greeces ability to meet its funding and liquidity needs and for the probability of default on marketable securities. Moodys government bond rating applies to marketable securities only.

Rationale for Review for Downgrade

Moodys review for downgrade will assess the likely outcome of the negotiations recently initiated between the newly-elected Greek government and the euro area authorities, as represented by the European Commission (EC) and European Central Bank (ECB). In particular, it will assess the Greek governments ability to secure its medium term financing capability through an extension or amendment to its current support programmer with the EC, which would likely also allow Greek banks to maintain access to ECB financing facilities.

Greeces new government has made clear its desire to materially change the terms of the existing support programmer with its official creditors. In Moodys view, there is considerable uncertainty regarding the outcome of the ensuing negotiations, and the ability of the two sides to reach an agreement which secures Greeces financing position.

The Greek government has been vocal about its political mandate to roll back austerity measures, reduce primary budget surplus targets and negotiate a debt reduction agreement with its official creditors. However, other euro area governments are likely to resist such demands given their policy stance in recent years and because further debt relief could undermine debt consolidation efforts elsewhere in the euro area.

If the Greek government is unable to secure an agreement with official creditors in the next few weeks, the probability of default on debt issued to the private sector would rise sharply. Without the assurance of an official-creditor programmer, Greece will find it very difficult to meet its near-term financing needs against the background of very low liquidity buffers.

Delays to official-sector disbursements of around EUR7.2 billion that were originally due last year have exacerbated Greeces liquidity and funding challenges. In 2015, Greece has to repay around EUR16 billion in long-term debt, roll over outstanding T-bills of EUR14.6 billion and make around EUR4 billion in interest payments to private and official creditors. The first large repayment of EUR3.5 billion is due on 20 July, followed by another repayment for EUR3.2 billion on 20 August, both for marketable securities held by the ECB.

The first half of the year also requires the Greek government to roll over around EUR11.6 billion of T-bills, and Moodys sees ECB support for the Greek banking sector as a key determinant of its ability to achieve the rollover. The ability of Greeces domestic banks to continue to play the role of principal buyers of T-bills will rest on continued access to ECB facilities. The decision of the ECB on 4 February to lift the waiver of minimum credit rating requirements for marketable instruments issued or guaranteed by the Government of Greece is noteworthy. Although the ECB renewed access to the Emergency Liquidity Assistance (ELA), Moodys believes that future access is likely to be contingent on i) Greece remaining within a formal programmer; and ii) the ECB concluding that the Greek banks remain solvent and thus retaining access to ELA provided through the Bank of Greece.

While the recent Asset Quality review by the ECB concluded that the Greek banks were in fact solvent, the prospect of an increase in risk of a default by the Greek government could cause the ECB to revise that view. Were it to do so, Greek banks could lose access to refinancing facilities, which will impair the governments ability to roll over maturing T-bills.

In addition, Greece will need to depend on additional net T-bill issuance to meet its budgetary needs, but Greeces agreement with its official creditors limits T-bill issuance to a maximum outstanding amount of EUR15 billion, which it is very close to reaching already. Moodys notes that raising this cap will also require official creditor approval.

Even if an agreement is reached between Greece and the official creditors, Moodys will assess the likely impact of the current stand-off, and any consequent changes to the Greek governments fiscal and economic policy, on the countrys growth prospects and public sector debt trajectory in the coming years. Even though Greeces general government debt-to-GDP ratio is the second-highest in Moodys rated universe, 80% of the debt is held by official creditors (including the ECB) and therefore benefits from low interest rates and long maturities. Consequently, the debt affordability ratio — interest to revenues — has reduced to 9.2% in 2014 from 16.6% in 2011 and the average maturity of the debt is long, at around 20 years.

However, the countrys very weak recovery, estimated by Moodys at 0.6% real economic growth in 2014 after a six-year contraction, and its inability to attract private investment, remain key credit weaknesses. Greeces economic outlook faces risks to the downside in the event of continued uncertainty with respect to funding and liquidity, combined with the heightened political risks and the uncertain relationship with official creditors.

Moodys would consider downgrading Greeces Caa1 government bond ratings were it to conclude, as a result of the review, that an agreement with official creditors is not likely to be reached in time to enable the government to repay its creditors who hold debt on commercial terms; and that the likelihood of a significant deceleration or even reversal in the implementation of the adjustment programmer would further hinder Greeces growth prospects.

Although not likely in the near term, Moodys could consider upgrading Greeces government bond rating in the event of an increase in the pace of fiscal consolidation and structural reforms; continued economic growth and sustained large primary surpluses, both of which would support a continued decline in debt levels; and more certainty and visibility on future external financial support and the political environment.

Prompted by the factors described above, the publication of this credit rating action occurs on a date that deviates from the previously scheduled release date in the sovereign release calendar, published on

  • GDP per capita (PPP basis, US$): 25,126 (2013 Actual) (also known as Per Capita Income)
  • Real GDP growth (% change): -3.9% (2013 Actual) (also known as GDP Growth)
  • Inflation Rate (CPI, % change Dec/Dec): -2.6% (2014 Actual)
  • Gen. Gov. Financial Balance/GDP: -12.2%(2013 Actual) (also known as Fiscal Balance)
  • Current Account Balance/GDP: 0.6% (2013 Actual) (also known as External Balance)
  • External debt/GDP: [not available]
  • Level of economic development: Low level of economic resilience
  • Default history: At least one default event (on bonds and/or loans) has been recorded since 1983.

On 03 February 2015, a rating committee was called to discuss the rating of the Greece, Government of. The main points raised during the discussion were: The issuer has become increasingly susceptible to event risks as there is increased uncertainty over whether Greeces new government will come to an agreement with official creditors in time to meet its near-term funding and liquidity needs.