Mortgage Interest Rates - Where do we go from here?
Mortgage interest rates New Jersey are still on an upward trend and the hot refinance market has been cooling off. People are refinancing, but their motivations are different. Most refinancing that is going on right now is more need-driven than rate-driven, people are getting out of ARM mortgages as opposed to everyone looking for lower rates. That being said, for people who have not refinanced and can qualify for a lower rate, immediately is always the best time to get started. The 30-year fixed rate average, mentioned above, of 6.34 percent very well may rise to match the 6.9 percent ten-year average in the latter half of 2006; however, that is still well below the 20-year average of eight percent.
More Indicators
Mortgage interest rates New Jersey have more indicators than discussed above that can predict the movements of mortgage interest rates with decent accuracy. Of course, the short term interest rate is a vital metric, but let's takes another look at the link between 30-year fixed mortgage rates and long term government bonds. You already know that the fluctuations of 30-year fixed mortgage rate averages are closely tied to the yields of 10 year Treasury notes. Those Treasury notes rose precisely a quarter-point during the eight weeks between Federal Reserve meetings, from 4.53 percent on January 31 to 4.78 percent on March 28. Similar to that mentioned above, fixed mortgage rates don't move in lock step with long term Treasury yields, but it's a pretty good indicator.
One last thing to remember, currently variable interest rates on adjustable mortgages New Jersey seem to be moving in tandem with federal fund rates, which are moving upward - that's one last warning for you folks with adjustable rate mortgages. Whether you already own a mortgage and need to revise your debt strategy or you are looking at a new loan, let Center State Mortgage do for you as it has done for hundreds of thousands of others.
Showing posts with label simple interest loan new york. Show all posts
Showing posts with label simple interest loan new york. Show all posts
Friday, March 19, 2010
Mortgage Interest Rates
Mortgage interest rates New Jersey favorable to home buying are still available. Mortgage interest rates have moved higher than the sub-six percent levels that were available from 2003-2005, however, the current 30-year 6.34 percent fixed mortgage average is still well below the eight percent average over the last 20 years. The most important characteristic of mortgage interest rates is whether they are fixed or adjustable.
Since July of 2002, the average 30-year fixed rate mortgage has remained below 6.5 percent. While Federal Reserve short term interest rate increases affect fixed mortgage rates other indicators are also crucial; yields on long term government bonds and fixed rate mortgages are closely linked. Demand for US government bonds and domestic inflation that weighs heavy on that demand must be examined. Low six percent mortgage interest rates New jersey will become a luxury of the past as rates move into the upper 6s in the second half of 2006 bound to revisit the ten-year average of 6.9 percent. Regardless, borrowers are still favoring fixed-rate mortgages over adjustable-rate mortgages because the difference in initial rates is not enticing; current 30-year fixed rate averages 6.34 percent, while a 5/1 ARM is 6.08 percent and a one-year ARM is 5.73 percent.
Adjustable Rates & the ARM
If you have an adjustable rate mortgage New Jersey (ARM) it might be smart to keep a close eye on interest rate movements in the market. ARMs bound to reset in 2007 with a hefty increase in their monthly mortgage payment may be an unpleasantly surprise some folks. Those people whose ARMs have already reset know that substantial increases in monthly mortgage payments can be burdensome to say the least. The one year Treasury, a common index for adjustable rate mortgages, may top five percent by the time the Federal Reserve is done raising interest rates, add on the margin of 2.5 percentage points and many ARM borrowers will be looking at a rate of 7.5 percent. Households that can withstand an increase in their monthly mortgage payment may opt for an ARM in hopes of seeing mortgage interest rates fall if the Federal Reserve does have to lower short term interest rates in the further off future. For people on a more fixed income who have or are thinking about an adjustable rate mortgage beware that short term interest rates, which are on an upward trend, can drastically affect a person's mortgage debt load.
Since July of 2002, the average 30-year fixed rate mortgage has remained below 6.5 percent. While Federal Reserve short term interest rate increases affect fixed mortgage rates other indicators are also crucial; yields on long term government bonds and fixed rate mortgages are closely linked. Demand for US government bonds and domestic inflation that weighs heavy on that demand must be examined. Low six percent mortgage interest rates New jersey will become a luxury of the past as rates move into the upper 6s in the second half of 2006 bound to revisit the ten-year average of 6.9 percent. Regardless, borrowers are still favoring fixed-rate mortgages over adjustable-rate mortgages because the difference in initial rates is not enticing; current 30-year fixed rate averages 6.34 percent, while a 5/1 ARM is 6.08 percent and a one-year ARM is 5.73 percent.
Adjustable Rates & the ARM
If you have an adjustable rate mortgage New Jersey (ARM) it might be smart to keep a close eye on interest rate movements in the market. ARMs bound to reset in 2007 with a hefty increase in their monthly mortgage payment may be an unpleasantly surprise some folks. Those people whose ARMs have already reset know that substantial increases in monthly mortgage payments can be burdensome to say the least. The one year Treasury, a common index for adjustable rate mortgages, may top five percent by the time the Federal Reserve is done raising interest rates, add on the margin of 2.5 percentage points and many ARM borrowers will be looking at a rate of 7.5 percent. Households that can withstand an increase in their monthly mortgage payment may opt for an ARM in hopes of seeing mortgage interest rates fall if the Federal Reserve does have to lower short term interest rates in the further off future. For people on a more fixed income who have or are thinking about an adjustable rate mortgage beware that short term interest rates, which are on an upward trend, can drastically affect a person's mortgage debt load.
Wednesday, February 10, 2010
What Interest Rates Are You Looking At?
Thinking about taking out a mortgage, but not sure what kind of interest rate you can get? Wouldn’t it be nice if they just had a chart where you could see what you can expect to pay with a certain credit score, down payment and other factors?
Well, they do – almost.
Fannie Mae’s Loan Level Price Adjustment (LLPA) Matrix and Freddie Mac’s Postsettlement Delivery Fee (PDF) matrices come about as close as you can get to a single chart telling you what you can expect to pay on a mortgage. Both detail the additional fees the lenders assess based on the borrower’s credit score, down payment, type of loan, type of property and other factors.
They don’t actually tell you what rate you’ll pay, but you can figure out what additional fees, if any, you’ll have to pay beyond what a "perfect" borrower might. And since the fees are commonly rolled into the interest rate – just the opposite of paying points – it’s a fairly straightforward calculation to see how your interest rate might be affected.
Both the LLPA and PDF break out a lot of possible situations that might cause you to pay more for your mortgage, like a cash-out refinance, high-balance adjustable rate mortgage, mobile home purchase, subordinate financing and the like. But for most borrowers, the primary things they’ll want to focus on, at least initially, are the credit score and loan-to-value matrices, or grids.
These grids list credit scores down the sides, and loan-to-value ratios (which correspond to down payments for purchases or home equity for refinancing) across the top. You find the range your credit score is in, see where that row interests with the column for your loan-to-value ratio, and viola! There’s the fee you need to pay for that combination of credit score and down payment.
For example, if your credit score is in the 700-719 range, you’ll typically pay an additional fee of 0.5 percent of the loan amount, as compared to someone with a higher credit score, according to the LLPA. In the 680-699 range, you’ll pay from 0.5 percent from 1.5 percent more, depending on your loan-to-value ratio. Lower credit scores pay even more; the premium ranges from 1.25 percent to 2.5 percent for credit scores in the 660-679 range.
You can also reduce your costs – borrowers with higher credit scores can actually get a 0.25 percent credit if their loan-to-value ratio is less than 60 percent (40 percent equity or more).
More fees = higher interest rate
Rolling the fees into your interest rate generally means you’ll pay a quarter percent (0.25 percent) more in interest for each full percent of fees. You can also pay the fees separately as a closing cost.
There may be other factors that will cause your rate to differ from that available to other customers using the same lender, but consulting the LLPA or PDF is a good place to start.
You can also seek a nonconforming loan, which are not sold to Fannie or Freddie on the secondary market. However, you may find that rates and fees for these types of loans exceed any savings you’d realize.
Well, they do – almost.
Fannie Mae’s Loan Level Price Adjustment (LLPA) Matrix and Freddie Mac’s Postsettlement Delivery Fee (PDF) matrices come about as close as you can get to a single chart telling you what you can expect to pay on a mortgage. Both detail the additional fees the lenders assess based on the borrower’s credit score, down payment, type of loan, type of property and other factors.
They don’t actually tell you what rate you’ll pay, but you can figure out what additional fees, if any, you’ll have to pay beyond what a "perfect" borrower might. And since the fees are commonly rolled into the interest rate – just the opposite of paying points – it’s a fairly straightforward calculation to see how your interest rate might be affected.
Both the LLPA and PDF break out a lot of possible situations that might cause you to pay more for your mortgage, like a cash-out refinance, high-balance adjustable rate mortgage, mobile home purchase, subordinate financing and the like. But for most borrowers, the primary things they’ll want to focus on, at least initially, are the credit score and loan-to-value matrices, or grids.
These grids list credit scores down the sides, and loan-to-value ratios (which correspond to down payments for purchases or home equity for refinancing) across the top. You find the range your credit score is in, see where that row interests with the column for your loan-to-value ratio, and viola! There’s the fee you need to pay for that combination of credit score and down payment.
For example, if your credit score is in the 700-719 range, you’ll typically pay an additional fee of 0.5 percent of the loan amount, as compared to someone with a higher credit score, according to the LLPA. In the 680-699 range, you’ll pay from 0.5 percent from 1.5 percent more, depending on your loan-to-value ratio. Lower credit scores pay even more; the premium ranges from 1.25 percent to 2.5 percent for credit scores in the 660-679 range.
You can also reduce your costs – borrowers with higher credit scores can actually get a 0.25 percent credit if their loan-to-value ratio is less than 60 percent (40 percent equity or more).
More fees = higher interest rate
Rolling the fees into your interest rate generally means you’ll pay a quarter percent (0.25 percent) more in interest for each full percent of fees. You can also pay the fees separately as a closing cost.
There may be other factors that will cause your rate to differ from that available to other customers using the same lender, but consulting the LLPA or PDF is a good place to start.
You can also seek a nonconforming loan, which are not sold to Fannie or Freddie on the secondary market. However, you may find that rates and fees for these types of loans exceed any savings you’d realize.
Monday, January 18, 2010
Simple Interest Mortgages Are Not So Simple
One of the small pitfalls to look out for when shopping for a mortgage has to do with simple interest vs. a standard mortgage. Although the term “simple interest” sounds harmless, it can cost you money if you’re not careful.
A simple-interest mortgage is one where the interest charges are calculated on a daily basis, as opposed to once a month on a regular mortgage. There’s no difference in the two if you always pay your mortgage exactly on the due date each month, but if you tend to pay a few days late, it will cost you.
Many borrowers tend to pay their mortgages “late” each month because most mortgages have a grace period of about two weeks before any late fees are assessed. So if your mortgage is due on the first but you typically get your payment to your servicer around the 15th, that’s half a month of additional interest (not to mention running the risk of getting hit with a late fee if the mail delivery is running a bit slow!).
True, the actual amount of additional interest is fairly small – you’re only paying additional interest on the amount of your principal payment for the month. For example, suppose you owe $200,000 on your mortgage and $500 of your current monthly payment is going toward the principal. With a simple interest loan, for each day your payment is late, the interest rate is charged against a balance of $200,000 instead of $199,500.
For the $500 difference, the interest isn’t much – about 32 cents a day on a loan with an interest rate of 6 percent, or $3.20 if you typically pay 10 days late. But over the life of the loan, it can add up. On a 6 percent mortgage with simple interest, paying 10 days late consistently means more than three additional mortgage payments at the end of a 30-year loan – a period that gets even longer as the interest rate goes up or the longer you delay making your monthly payments.
The problem for many borrowers is that they assume simple interest is normal. When their mortgage lender tells them “Oh, it’s just simple interest” it sounds like the most straightforward, least expensive thing to do. But it’s not.
One more thing – even if your lender tells you you’re getting a standard mortgage, it might not stay that way unless it’s specifically written into the mortgage contract. Some mortgage servicers have been known to convert standard interest mortgages to simple interest when acquiring a mortgage if the loan terms don’t specifically prohibit them from doing so. So it’s a good idea to make sure your loan agreement specifically states you’re getting a standard mortgage at the outset.
A simple-interest mortgage is one where the interest charges are calculated on a daily basis, as opposed to once a month on a regular mortgage. There’s no difference in the two if you always pay your mortgage exactly on the due date each month, but if you tend to pay a few days late, it will cost you.
Many borrowers tend to pay their mortgages “late” each month because most mortgages have a grace period of about two weeks before any late fees are assessed. So if your mortgage is due on the first but you typically get your payment to your servicer around the 15th, that’s half a month of additional interest (not to mention running the risk of getting hit with a late fee if the mail delivery is running a bit slow!).
True, the actual amount of additional interest is fairly small – you’re only paying additional interest on the amount of your principal payment for the month. For example, suppose you owe $200,000 on your mortgage and $500 of your current monthly payment is going toward the principal. With a simple interest loan, for each day your payment is late, the interest rate is charged against a balance of $200,000 instead of $199,500.
For the $500 difference, the interest isn’t much – about 32 cents a day on a loan with an interest rate of 6 percent, or $3.20 if you typically pay 10 days late. But over the life of the loan, it can add up. On a 6 percent mortgage with simple interest, paying 10 days late consistently means more than three additional mortgage payments at the end of a 30-year loan – a period that gets even longer as the interest rate goes up or the longer you delay making your monthly payments.
The problem for many borrowers is that they assume simple interest is normal. When their mortgage lender tells them “Oh, it’s just simple interest” it sounds like the most straightforward, least expensive thing to do. But it’s not.
One more thing – even if your lender tells you you’re getting a standard mortgage, it might not stay that way unless it’s specifically written into the mortgage contract. Some mortgage servicers have been known to convert standard interest mortgages to simple interest when acquiring a mortgage if the loan terms don’t specifically prohibit them from doing so. So it’s a good idea to make sure your loan agreement specifically states you’re getting a standard mortgage at the outset.
Subscribe to:
Posts (Atom)
