Tag Archives: Refinancing

Mortgage Rates Hover Near All-Time Low

HISTORICPHOENIXDISTRICTS.COM DAILY REAL ESTATE NEWS | FRIDAY, JULY 01, 2016

Fixed-rate mortgages this week dropped to their lowest averages of the year, which analysts attribute to the fallout from last week’s “Brexit” vote.

The 30-year fixed-rate mortgage averaged 3.48 percent this week, only 17 basis points from its all-time record low of 3.31 percent in November 2012, Freddie Mac reports.

“In the wake of the Brexit vote, the yield on the 10-year U.S. Treasury bond plummeted 24 basis points,” says Sean Becketti, Freddie Mac’s chief economist. “This extremely low mortgage rate should support solid home sales and refinancing volume this summer.”

Freddie Mac reports the following national averages for the week ending June 30: 

  • 30-year fixed-rate mortgages: averaged 3.48 percent, with an average 0.5 point, falling from last week’s 3.56 percent average. Last year at this time, 30-year rates averaged 4.08 percent. 
  • 15-year fixed-rate mortgages: averaged 2.78 percent, with an average 0.4 point, dropping from last week’s 2.83 percent average. Last year at this time, 15-year rates averaged 3.24 percent. 
  • 5-year hybrid adjustable-rate mortgages: averaged 2.70 percent, with an average 0.5 point, falling from last week’s 2.74 percent average. A year ago, 5-year ARMs averaged 2.99 percent. 

Source: Freddie Mac

mortgage,interest rates,national,real estate,loans
It’s never been a better time to buy a home. Money is inexpensive but that doesn’t mean you should spend a lot, unless you’re wealthy, of course. Call Laura B. for a free consultation on buying a home in any one of the Historic Phoenix Districts, historic adjacent, Uptown, Midtown, Downtown, Scottsdale, Biltmore, Paradise Valley, Arcadia or Surrounding suburbs.

THE MORTGAGE TRICK THAT COULD SAVE YOU $100,000 OR MORE

Should you switch to a 15-year mortgage?

If paying off your house is a priority, you’ve obviously considered it. “One of the biggest benefits of a 15-year mortgage term is the ability to quickly pay off your home loan,” said Money Crashers. “This option is perfect if you plan to stay put and don’t want to pay your mortgage for a lengthy period of time.” 15 year mortgage

But even if you’re not planning to live in your home forever, a 15-year mortgage can be a great way to go because of the money saved. And we’re not talking about pennies. We’re talking hundreds of thousands of dollars.

“The 30-year fixed mortgage is practically an American archetype, the apple pie of financial instruments. It is the path that generations of Americans have taken to first-time home ownership. According to the Mortgage Bankers Association, 86% of people applying for purchase mortgages in February 2015 opted for 30-year loans,” said Investopedia. “But many of those buyers might have been better served if they had opted instead for a 15-year fixed-rate mortgage, the 30-year’s younger, and less popular, sibling. A shorter-term loan means a higher monthly payment, which makes the 15-year mortgage seem less affordable. But, in fact, the shorter term actually makes the loan cheaper on several fronts.”

The savings is substantial

“Imagine a $300,000 loan, available at 4% for 30 years or at 3.25% for 15 years,” they said. “The combined effect of the faster amortization and the lower interest rate means that borrowing the money for just 15 years would cost $79,441, compared to $215,609 over 30 years, or nearly two-thirds less.”

According to The Mortgage Reports, going with a 15-year mortgage translates to a reduction in “the amount of mortgage interest paid over the loan’s life by $44,000 per $100,000 borrowed as compared to a 30-year loan. For loans at the conforming loan limit of $417,000, then, a homeowner would save $183,000 by using a 15-year mortgage to finance the home instead of using a 30-year one.”

That’s a lot of money. But it’s that higher monthly payment that is often the sticking point for many borrowers. The monthly payment on a 15-year loan will cost more than one that’s double in length for obvious reasons—you’re paying off more money in less time. But the two loan terms do not offer an apples-to-apples comparison because the interest rates for 15-year mortgages tend to be lower.

“15-year-loans are less risky for banks than 30-year loans, and because the money banks use to make shorter-term loans costs them less than the money they use to make longer-term loans, consumers pay a lower interest rate on a 15-year-mortgage — anywhere from a quarter of a percent to a full percent (or point) less,” said Investopedia. “And the government-supported agencies that finance most mortgages impose additional fees, called loan level price adjustments, which make 30-year mortgages more expensive.”

The monthly payment on the 30-yer mortgage referenced above is $1,432. On the 15-year loan, it comes out to $2,108. That steep increase is often a deterrent for borrowers – especially those who are more concerned with their current monthly input and output than potential long-term savings.

Doing it on your own

Of course, a 15-year mortgage isn’t the only way to pay your house off sooner. Making additional principal payments can eat away at your balance without tying you to a higher monthly payment. Even one extra payment per year can make a big difference.

“Making an extra mortgage payment each year (totaling 13 payments in a 12-month period) could reduce a 30-year mortgage loan to approximately 22 years,” said Nationwide.

“The most budget-friendly way to do this is to pay 1/12 extra each month. For example, by paying $975 each month on a $900 mortgage payment, you’ll have paid the equivalent of an extra payment by the end of the year.”

Overpaying also offers a shorter path to an equity position, so when you are ready to sell, you have more equity in your home and are in a greater buying position. And if you do get into a situation where you need cash you can always pull the equity out of your home.

If you’re on the fence and are thinking about buying a historic home in Phoenix, please call Laura B. Browse all historic Phoenix Districts and their homes for sale.

[contact-form][contact-field label=’Name’ type=’name’ required=’1’/][contact-field label=’Email’ type=’email’ required=’1’/][contact-field label=’Website’ type=’url’/][contact-field label=’Comment’ type=’textarea’ required=’1’/][/contact-form]

Housing Affordability Still High, For Now

DAILY REAL ESTATE NEWS | TUESDAY, FEBRUARY 02, 2016

Home prices may have been on the rise the last few years, but homes are still more affordable now than they were in the pre-bubble years, according to the latest Mortgage Monitor Report released by Black Knight Financial Services.

Households are using 21 percent of the national median income to pay a mortgage on a median-priced home. In 2000-2002, the average payment-to-income ratio was 26 percent, and in 2006, it was 33 percent.

However, Black Knight’s report warns that if home prices continue to increase – as they have year-over-year for 43 consecutive months – the affordability picture in home ownership could start to change in two years.

Black Knight factored in a continuing 5.5 percent annual home price appreciation as well as interest rate rises of 50 basis points a year. Under that scenario, “we see that in two years home affordability will be pushing the upper bounds of that pre-bubble average,” says Ben Graboske, senior vice president at Black Knight Data and Analytics. “At the state level under that same scenario, eight states would be less affordable than 2000-2002 levels within 12 months and 22 states would be within 24 months.”

Graboske notes that Hawaii and Washington, D.C., in particular, are already less affordable than they were during the pre-bubble era. On the other hand, he says, even after 24 months under this scenario, Michigan – and a few other states – would still be much more affordable by the end of 2017 than it was in the early 2000s.

Within 12 months, the average mortgage payment is expected to rise by $114, which would then require 24 percent of a household’s monthly income – still below the 2000-2002 levels, according to Black Knight. But by the end of 2017, monthly mortgage payments are expected to be $240 more than today, which would push the tally to 26.5 percent of a household’s income and the upper levels of the pre-bubble averages, the report notes.

If you’re on the fence and are thinking about buying a home in Phoenix, please call Laura B.

[contact-form][contact-field label=’Name’ type=’name’ required=’1’/][contact-field label=’Email’ type=’email’ required=’1’/][contact-field label=’Website’ type=’url’/][contact-field label=’Comment’ type=’textarea’ required=’1’/][/contact-form]

Market Unrest Pushes Down Mortgage Rates

DAILY REAL ESTATE NEWS | FRIDAY, JANUARY 22, 2016

For the third consecutive week, mortgage rates edged down, with the 30-year fixed-rate mortgage continuing its run below 4 percent, Freddie Mac reports in its weekly mortgage market survey.

“The Freddie Mac mortgage rate survey had difficulty keeping up with market events this week,” says Sean Becketti, Freddie Mac’s chief economist. “The 30-year mortgage rate dropped 11 basis points to 3.81 percent, the lowest rate in three months. This drop reflected weak inflation and nonstop financial market turbulence that is driving investors to the safe haven of Treasuries. However, the survey was largely complete prior to Wednesday’s Treasury rally that drove the yield on the 10-year Treasury below 2 percent, down 29 basis points since the end of 2015.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Jan. 21:

  • 30-year fixed-rate mortgages: averaged 3.81 percent, with an average 0.6 point, dropping from last week’s 3.92 percent average. Last year at this time, 30-year rates averaged 3.63 percent.
  • 15-year fixed-rate mortgages: averaged 3.10 percent, with an average 0.5 point, falling from last week’s 3.19 percent average. A year ago, 15-year rates averaged 2.93 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 2.91 percent, with an average 0.5 point, dropping from last week’s 3.01 percent average. Last year at this time, 5-year ARMs averaged 2.83 percent.

It’s a fantastic time to buy a home while interest rates are still at historic lows.

2016 Interest Rate Graph

Interest Rate Chart January 2016

Source: Freddie Mac

[contact-form][contact-field label=’Name’ type=’name’ required=’1’/][contact-field label=’Email’ type=’email’ required=’1’/][contact-field label=’Website’ type=’url’/][contact-field label=’Comment’ type=’textarea’ required=’1’/][/contact-form]

A big change could be about to come to the housing market

Jonathan Marino and Andy Kiersz
Dec. 26, 2015, 8:44 AM

The Federal Reserve has finally lifted interest rates from 0% and after nine years without a rate hike.

The potential ramifications of the policy move are far-reaching and span various American industries, from automakers to homebuilders to investment banks.

But those impacts may be disparate.

Typically, rising interest rates make for a more difficult borrowing environment. That has the potential to slow home sales, which impacts US banks, as well as new starts, which will hurt homebuilders.

With the Fed’s rate hike, history shows homes starts have tended toward a decline, which will inevitably hurt homebuilders. When rates get higher, building new homes is usually a less attractive prospect.

“Homebuilding stocks are typically losers from an absolute and relative standpoint during tightening cycles,” according to a separate Credit Suisse note from December 15. “Historically homebuilding stocks under performed the S&P 500 during each of the past six Fed tightening cycles.”

For years after the Federal Reserve’s decision to back down interest rates to 0%, a badly beaten homebuilding sector saw gradual increases in both homes starts and permits. They never rose to the pre-crisis levels, but the period that led up to this was in part fueled by an unprecedented boom in lending to many unqualified borrowers.

Yet it is debatable on Wall Street whether the average consumer’s psyche is far less tethered to the behavior of US central bankers than, say, that of a Wall Street executive.

“If we do see some rate increases coming, because it reflects a stronger economy, nobody is going to not buy a house because the mortgage rates went up,” Wells Fargo CEO John Stumpf said the Goldman Sachs Financial Services Conference earlier this month. “They can choose a different product and probably get the same rate. The same thing is true for small businesses.”

But Bank of America CEO Brian Moynihan doesn’t agree with Stumpf.

“If you see rates rise, you’ll see the mortgage market slow down,” Moynihan said at same event earlier this month, before the Federal Reserve raised rates.

At still the same event, Blackstone Group CEO Steve Schwarzman noted that most interest-rate hikes have typically resulted in an uptick in home prices.

“Twenty-five out of 26 times when interest rates went up, home prices went up,” Schwarzman said.

If that is indeed the case, homebuilders may be better building more and aiming to make it up on margin. Even at the end of 2016, interest rates are expected to remain near record lows for the last half-century.

It’s a great time to buy a home.

[contact-form][contact-field label=’Name’ type=’name’ required=’1’/][contact-field label=’Email’ type=’email’ required=’1’/][contact-field label=’Website’ type=’url’/][contact-field label=’Comment’ type=’textarea’ required=’1’/][/contact-form]