US Mortgage Rates

Are Mortgage Rates Calculated The Same As Home Equity Loans?

Stacy Williams — Wed, 17 Mar 2010 17:17:17 +0000

Mortgage rates tend to be more complicated than home equity loan financing.

Are Mortgage Rates Calculated The Same As Home Equity Loans? No, mortgage rates are not calculated in the same way as a home equity loan. Home equity loans in many ways are based off of a fundamental trust which a bank awards to you as a trusted customer. A lot of different factors can go into a mortgage rate, this particularly true for people who are attempting to become first time home buyers. Are Mortgage Rates Calculated The Same As Home Equity Loans? Mortgage rates are something that are based off of large aspects and economic factors. Home equity loans are based on a smaller, more micro and individualized basis.

Government Intervention

Are Mortgage Rates Calculated The Same As Home Equity Loans? No, partially because of the amount of government intervention that can be associated with a mortgage. People who are considering buying a home equity loan are financially established in regards to their home and their community. People who are either potentially just getting their first mortgage and/or working through the Federal Housing Administration or Housing and Urban Development are likely to be viewed with a little bit more of a cautious eye than a couple who has been a part of a community for thirty years and ends up seeking a home equity loan.

Bank Accounts

People who ask for a home equity loan probably have an established bank account at the given bank where they are asking for a loan. The people who are asking for a mortgage could be complete unknowns who are just moving into town. Are Mortgage Rates Calculated The Same As Home Equity Loans? No, because there needs to be healthy skepticism on the part of banks as far as who exactly is asking for a mortgage. There wasn’t enough healthy skepticism involved in the last housing crisis, too many people were getting mortgages.

How Are Commercial Interest Rates Determined?

Kevin Landis — Wed, 17 Mar 2010 17:15:57 +0000

You can never know what to expect when it comes to commercial interest rates. They’re determined by everything from the applicant to the economy.

If you want to invest in an office building or some other commercial property, then chances are high that you will need a commercial mortgage or loan. When you look for such a loan, know that interest rates will no doubt vary. This depends upon a number of factors. The following includes some basic information about how commercial interest rates are determined.

The Risk of the Investor

Commercial interest rates are in place to protect lenders. After all, no group wants to lend out thousands of dollars only to never see it again. Thus, if an individual or group of investors has a shaky credit history, the interest rates will be higher than if the people have pristine credit histories and have experience with commercial properties.

The Building Itself

The lending group will always look at the commercial property in which people are interested. If the property is a high risk area, the interest rates on the loan may go up. Additionally, the value of the property will also come into play: the more you need to borrow on this commercial property, the more you can expect in interest rates. After all, banks and financial groups are businesses first. They aren’t going to give you free money.

The Economy

And of course, all interest rates are affected by the economy in which we live. If the economy is robust, then you can expect lower rates than when it’s struggling. During lean times, financial groups have less time and money to lend to people. High interest rates protect such lending.

If you know how commercial interest rates are determined, you will be prepared for what’s to come. Mortgages and loans are great because they can help you invest in a variety of properties. Take the time to consider your credit history, the value of the property, and the economy, and you will have realistic expectations about interest rates.

Why are mortgage rates rising now?

Jim Micheals — Wed, 17 Mar 2010 17:14:28 +0000

Why are mortgage rates rising now? Read here to find out why mortgage rates are going up!

With housing prices at their lowest point in years, many people are looking to purchase a home. Unfortunately, mortgage interest rates have been rising consistently for the past two months, which has made purchasing a home difficult for many people. This article discusses why mortgage rates are rising now and why they will continue to do so.

Inflation

The first reason why mortgage rates are rising now is inflation. Inflation is a key determinant of mortgage rates. With the economy looking as if it will begin to pick up out of the recession, many fear that inflation will increase dramatically. If inflation increases, the Federal government will be forced to raise interest rates to stop the growth of inflation. When the interest rates increase, mortgage rates will increase as well.

Federal Spending

Another reason why mortgage rates are rising now is because of Federal spending. To save mortgage giants Freddie Mac and Fannie Mae, the government purchased $1.5 billion in mortgage backed securities and invested heavily in the two companies to keep rates down. The Federal money is scheduled to spent by March 2010, at which point they are not expected to invest more. As the money to those two companies evaporates, they will slowly be required to raise rates.

Supply and Demand

The next reason why mortgage rates are rising now is because of supply and demand. Like all things in the global economy, supply and demand of mortgages essentially determines the market price. Since mortgage rates were at all time lows recently, many first time homebuyers were looking to purchase a home and many with existing mortgages were looking to refinance. This increased demand for mortgages, coupled with a same level of mortgage supply, has made the mortgages more expensive through increased interest rates.

How Should Points Affect The Way I Shop For A Mortgage?

Stacy Williams — Tue, 16 Mar 2010 23:54:54 +0000

The most effective ways to alter mortgage shopping techniques based on the inclusion of points in the structure of a home loan.

In the current economic environment, more and more lenders are including points as part of home loans. Points are upfront fees that a lender collects during the lending process; each point is one percent of the total loan amount. While these types of fees were once easily avoidable, the housing crisis has made lenders more careful and made such expenses harder to avoid.

The Affect of Points of Mortgage Terms

Prior to the unraveling of the housing market, lender’s would often offer a borrower and option that included points and one did not. The option with the points would typically carry a lower interest rate, since the required profit to the lender was collected as a point based fee. Under these circumstances, a borrower could easily estimate when the breakeven mark would be reached. If he or she planned to be in the home for that long, paying the points was reasonable; if not, avoiding these fees was the better choice.

Changing Mortgage Shopping Practices to Address Points

Borrowers used to have far greater leeway to push a lender to give the lower interest rate and waive the points. Under the increased scrutiny now present, this is less common. Furthermore, points must often been paid out of closing costs and not simply rolled into the loan. The effect is that either more upfront capital is required, or a greater loan amount to purchase the same house. When you are shopping for a mortgage, it is advisable to consult your lender or mortgage broker to determine options. This will quickly reveal if you have sufficient capital and credit to buy in the price range in which you are interested. Once this is determined, it will be possible to accept these terms or shop for other mortgage options.

Are Mortgage Points A Good Investment?

Kevin Landis — Tue, 16 Mar 2010 23:52:59 +0000

Some interesting facts that answer the question “Are Mortgage Points a Good Investment?” Who benefits from prepaid points, the borrower or the lender?

Are mortgage points a good investment? To make an informed decision one must first understand exactly what mortgage points are and how they affect the loan. Mortgage points, or discount points as they are sometimes referred to, are actually a form of prepaid interest. Each “point” is equal to 1% of the total loan amount. In exchange for the prepayment of interest in the form of points the lender will offer a lower mortgage interest rate on the loan.

Why Pay Points?

Many borrowers choose to pay the prepaid points in an effort to keep the monthly payments lower. This in turn can facilitate the borrower being able to borrow more money and still qualify for the loan. Usually 1 point will shave .125% off the interest rate charged for the life of the loan.

Are Mortgage Points A Good Investment?

This depends on the borrowers intentions with the property. If it is the intention to sell the property before the break-even point then it is not a good investment. In this case the borrower will take a loss on the extra interest that was paid up front. If the borrower does not intend to sell the property until after the break-even point it then becomes a good investment.

Where is the Break-Even Point?

This can be different for each loan based on a number of factors such as loan amount, length of loan, interest rate and the number of points paid at the beginning of the mortgage. There are many calculators on the net that can give you this information.

Who Benefits Most from Mortgage Points?

So when asking “Are mortgage points a good investment?” the short answer is “it depends.” The mortgage lender benefits if the property is sold before the break-even point. The consumer benefits if the property is sold after the break-even point.

Can Mortgage Points Be Financed?

Jim Micheals — Tue, 16 Mar 2010 23:51:44 +0000

Financed mortgage points save money over time but may cost borrowers more when refinancing. Discover how to evaluate options and maximize benefits.

Financed mortgage points may reduce monthly payments substantially. Restrictions apply however and may unreasonably restrict a borrower’s options. Carefully weigh potential savings against potential burdens before making a decision.

How to Make Money with Financed Mortgage Points

Lenders typically approve a variety of interest rates when offering a loan to a new customer. The variation in rates occurs because of the option to prepay interest charges. For example, a borrower may select an option to prepay 1% of a loan in advance to receive a 5% fixed interest rate. Alternatively, a borrower may refuse a prepayment and receive a 6% fixed interest rate. The 1% prepayment in this example is one point in industry terminology.

Financed mortgage points reduce total interest charges over the life of a loan but do not increase closing costs. At first glance, financed mortgage points appear to be a great way to save money. However, lenders typically include a variety of prepayment restrictions in loan agreements to insure that borrowers pay all points before refinancing.

Evaluating Savings

Consider using a financial calculator or a favorite computer spreadsheet to calculate savings. Remember to include the cost of financed mortgage points in the original principal balance. In the example above, prepaying 4% in advance reduces all monthly principal and interest payments by approximately 10% over 30 years. On a $100,000 loan, the monthly savings is approximately $40. Over 30 years, the $40 monthly savings amounts to $14,400 for an original cost of $4,000.

Prepayment restrictions vary among lenders. When reviewing loan offers and prepayment options, always consider the possibility of refinancing. If interest rates drop suddenly, refinancing at a lower rate would sacrifice interest prepayments paid in cash at closing. Additionally, when principal includes prepayments, refinancing may not be an option.

What First Time Buyer Programs Are Available For A Mortgage?

Eric Goodwill — Mon, 15 Mar 2010 23:50:24 +0000

The secret methods for first time buyers attempting to gain a home mortgage are within your grasp. Read on to find out the truth!

There is no secret that buying a home is a difficult prospect in this day and age. Between credit reports and local home ownership laws there can be a great deal of extra expense as well as frustration involved in buying that first home. To assuage the issues of purchasing that first home via mortgage there are several first time buyer programs available.

What are The Most Popular Programs?

The most frequent programs will come from the government in the form of HUD backed loans. These loans for first time buyers will vary depending on availability. Currently there are programs designed specifically to help hurricane victims become home owners as well as to aid ‘good neighbors’ in acquiring their first home. The good neighbor program basically offers home owner lending aid to teachers, firefighters, police officers, and etc. Anyone in a true civil service job that is often underpaid for the amount of work they do for their home community will find themselves capable of gaining one of these mortgage loan programs. Another truly helpful fire time buyer program comes in the form of the section 184 loan. This loan guarantees native Americans a home buyer loan through approved lenders.

Other Popular First Time Buyer Programs

There are several non-governmental programs that can be utilized for first time home buyers. Banks typically have programs that have zero-down payment plans and other similar programs to help people with reasonable credit to mortgage a home. Many times even individuals with bad credit will be able to secure a first time buyer home mortgage due to the equity of the home itself. Since a mortgage means that a house is used as collateral in case of failure to pay a loan the bank can foreclose and resell it to recoup their losses. First time buyers do not have a history of being foreclosed on yet and even with ‘bad credit’ many banks are willing to take a chance as long as there is a provable income involved.

How can I terminate my private mortgage insurance?

Bob Redtree — Mon, 15 Mar 2010 23:49:15 +0000

How can I terminate my private mortgage insurance? Read here on ways to end your private mortgage insurance requirements!

While home prices continue to fall and interest rates remain low, many people think now is the most affordable time to purchase a home. One cost that is often overlooked by home purchasers is private mortgage insurance, which can cost hundreds of dollars per month. Luckily, there are ways to terminate private mortgage insurance.

Pay Down Your Mortgage

The first way you can terminate your private mortgage insurance is to pay down your mortgage. Private mortgage insurance is only charged if you have less than 20% equity in your home. Over time, you will pay down your mortgage to the point where you have 20% or more equity in your home. At this point, the bank is required to terminate the private mortgage insurance. Unfortunately, depending on your down payment, it could take 10+ years to reach 20% equity.

Refinance Your Mortgage

The second way you can terminate your private mortgage insurance is to refinance your mortgage. When you look to refinance your mortgage, ask your lender if you can get a second mortgage as opposed to paying PMI. When getting a mortgage, the first will cover 80% of the purchase price and the second will cover up to the remaining 20%. This is a beneficial option over paying PMI because the interest is deductible and the loan amortizes.

Get a New Appraisal

The last way you can terminate your private mortgage insurance is to get a new appraisal. If you feel your home has appreciated since you purchased it and that you now have 20% equity in your home, you should get a new appraisal. If the appraisal proves that you have 20% or more equity in your home, your mortgage lender will be required to cancel the private mortgage insurance requirement.

Does Private Mortgage Insurance Offer Any Tax Advantage?

Ann White — Mon, 15 Mar 2010 23:47:56 +0000

Private mortgage insurance (PMI) is required when you purchase a home with a down payment less than 20% of the loan. PMI protects the lender from loan default, but it also allows you to buy a home with less cash reserves. Purchasing a home and financing with private mortgage insurance can also earn you a tax advantage.

PMI Tax Advantage

If you don’t have 20% to put down on a home, you are often give the option to take on a second mortgage or pay the lender mortgage insurance. Most borrowers opted to take on a second mortgage because it cost less than PMI.

However, in 2007, private mortgage insurance became tax deductible. As a homeowner, PMI may be cheaper than getting a piggyback loan, or second mortgage, on your home. It is important to analyze both sides in oder to make an informed decision.

Caveats

Four crucial caveats come into effect along with the private mortgage insurance tax advantage. Your home has to be purchased after 2007. If you purchased it before then, you have to refinance it after 2007. Your adjusted gross income must be less than $100,000 annually. Congress must renew the deal every year. It has been renewed for 2010, but it may not be next year.

Also, you must take a standard deduction. If you take an itemized deduction, then you will not qualify for the PMI tax deduction. This tax break typically adheres to families with income beween $50,000 and $100,000 a year.

Tips

You can eventually cancel private mortgage insurance. Once your loan value reaches below 80%, you are able to drop your PMI. Though you may end up paying more upfront for PMI, in the long run it may pay off. Unlike PMI, piggyback loans cannot be cancelled in time. You are typically locked into a 15 to 30 year loan with an adjustable or balloon interest rate.

Why Do I Need Private Mortgage Insurance?

Stacy Williams — Sun, 14 Mar 2010 23:46:51 +0000

Explanation of private mortgage insurance and why you may need it for your home loan.

Purchasing a new home requires you to save a large amount of money for a down payment. If you are unable to come up with 20% down, you can still take a loan, but will be required by lenders to take on private mortgage insurance (PMI). Private mortgage insurance protects your lender in the case that you default on your loan.

Benefits of PMI

As a borrower, PMI allows you to take out a larger loan with little to no money down. Lenders will allow a 3% to 5% down payment when PMI is in place. You’re best interest is to put 10% down, but this is not a requirement.

Private mortgage insurance also protects your lender. If you are unable to pay your loan, this limits the losses taken on by the bank.

The Process of PMI

PMI is calculated depending upon the size of loan you take on. The more money you put down, the less your PMI payment. Typically PMI is .5% to 1% of your loan amount.

If you place 10% down on a $150,000 mortgage, your PMI is calculated on the remaining 90%. Thus, your $135,000 loan will be multiplied by .5%, making your annual PMI payment $675. Your monthly payment is then roughly $56 in addition to your mortgage payment.

Canceling private mortgage insurance

A lender is required to tell you when your loan is paid down to less than 80% of the value. Once you have reached this percentage, you can cancel your PMI. You can also cancel your PMI if the value of your home increases to more than 80% of the loan. You must notify your lender when you are ready to cancel your mortgage insurance premium.