Arm rates resetting lower than current market rates
May 15, 2008
Home owners who have mortgages that may be adjusting in the next few months could be pleasantly surprised to find out their mortgage rates may actually be adjusting down. Their has been a great deal of speculation that the large number of arm’s scheduled to reset in 2008 would have a crippling effect on the housing market.
The Federal Reserve has worked agressively to try and restore the credit markes by reducing the Fed Funds rate down to 2%. While this has no direct correlation to mortgage rates, their is a correlation to other economic indexes such as the LIBOR. Most arms are now utilizing the LIBOR as the index of choice for future adjustments. This is good news for millions of home owners as the rates on the LIBOR have dropped in conjunction with rates on the Fed Funds rate. The LIBOR has several indexes including 1 year, 3 months, and 6 months. All three of these indexes are now under three percent. Most adjustabe rate mortgages have margins (amount added to index to determine new rate) of 2 to 3 percent. This essentially means that most home owners with arms will be adjusting under six percent if the market does not move significantly in the near future.
Long term fixed rate mortgage are still hovering around six percent so it would probably make sense to explore refinancing your mortgage if you plan to stay in the home beyond the next 12 months and want to have payment certainty for the long haul.
Consider a home equity line of credit
May 13, 2008
Yes, it is hard to imagine that lenders still offer second mortgages even after the mortgage crisis that has been seen within the market over the past six months. Their are a number of major lenders that will still offer home equity loans and fixed second mortgages, up to 90 or 95% of your homes value.
So who should consider a home equity loan?
Anyone who has equity in their home and may have a fixed mortgage rate lower than six percent should examine both refinancing their entire mortgage or applying for a second loan. A good way to analyze this is through a blended rate assesment. With prime hovering near 5% most borrowers should be able to qualify for a home equity loan with very favorable rates compared to first mortgages. The major advantage is that home equity loans often come with reduced fees and you pay only on the balance you owe. If you are consolidating debt or adding a home improvement and the loan amount is less than 20% of your overall loan balance than a second mortgage/home equity loan may make the most financial sense. A good lender should help you navigate all of your loan options to make the best financial decision based on both your short and long term goals.
Jumbo Loan Options Expanding
May 11, 2008
Millions of Americans have started to receive their rebate checks from the government in the mail over the past few weeks. This part of the economic stimulus package has received the most attention in the news, however there is another key benefit of the program that has also begun to trickle through. The legislation has also allowed for home owners hwo have jumbo loans to refinance these loans under conventional financing terms.
This new alternative should be welcome news to anyone who has a mortgage that is over 417k. The spread between conventional loan rates and jumbo loan rates has been in excess of two percent form the better part of the past six months. The secondary market for jumbo loan financing has all but disappeared and the result has been a dramatic increase with the mortgage rates on jumbo loans. Lenders such as CitMortgage, Countrwide and IndyMac are now able to qualify home owners in select counties for loan sizes up to $729,000 and have their loans underwritten and sold to either Fannie Mae of Freddie Mac. This is welcome news for anyone owning a home above $450,000 as this should help to bring some home buyers into this marketplace and provide realistic refinance options for home owners who may have chosen an adjustible rate mortgage a few years back.
How could Yahoo stock effect mortgage rates
May 5, 2008
The stock market could be under pressure from the fallout of the Yahoo & Microsoft merger. So what does this have to do with mortgage rates? The connection is strictly tied with investment dollars and decisions. When the stock market is doing well and investors are purchasing equities you tend to see mortgage rates increase as investors pull their money out of the safer bond market and invest in equities such as stocks.
The flipside of this analogy is that when investors are concerned about the direction of their equity investments or perceive higher risk in the stock market they tend to invest into the bond market. When this happens you tend to see mortgage rates decrease. Their is not always a direct correlation between the ten year bond and mortgage rates but this is a common index that investors follow when they are trying to follow the direction of which mortgage rates are heading.
Home owners or potential home owners who are shopping for a mortgage and must determine whether or not to lock or float their interest rate can use the stock market to help gauge what direction interest rates are heading but should be cautious that no one can predict where rates are moving and economic and investor news comes out on a daily basis that can change the markets direction.
Fed cuts key rate
May 1, 2008
The Federal Reserve as expected cut the fed funds rate by .25% lowering the key rate down to 2%. This translates over to a prime rate of 5%. The move was expected by most economists who recognize that the fed is facing an increasingly difficult task of balancing rates and economic growth.
The fed was non committal on whether they would continue lowering the fed funds rate this year. Despite a struggling real estate market the fed is now faced with record oil prices and must juggle the impact this could have with inflation. Additionaly, the fed is under pressure as the U.S. dollar continues to decline. The economy has been quite resiliant despite the struggles in the housing industry. Mortgage rates typically do not move when the fed cuts the fed funds rate, however yesterday after the announcement their was a slight decline in the bond market which would be good news for mortgage rates and those considering a refinance.
