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Will the Weak Housing Market Keep Mortgage Rates Low?

As I mentioned a few weeks ago, refinance mortgage rates could be going up at the enad of this month due to the end of the government stimulus programs aimed at keeping mortgage rates low.

But with a housing market that continues to show weakness, will the government not do something to keep mortgage rates low? One would suspect that the Fed will be keeping a close eye on the mortgage rates front. Some are guessing that the end of the Fed buyback programs are already built into today’s rates while others have been expecting a decent jump up in rates for April.

The overall economy has experienced a bit of a rebound as of late, which may put a damper on government stimulus to keep mortgage rates as low as they are now. It could be that a continued growth in the economy with a continued weak housing market could help to keep mortgage rates in a historic low “range”, but not necessarily at the levels we have experienced over the past several months.

Another cog in the wheel of the direction of mortgage rates is the future of the GSE’s such as Fannie and Freddie. The whole mortgage and housing market currently relies on the three government pillars, Fannie, Freddie and the Federal Housing Administration (FHA). There has been no real direction coming from the Obama administration on how these entities will be reformed. Future reform for these behemoths is up in the air at the moment.

Some on Capitol Hill argue that the government's push to expand homeownership through Fannie and Freddie was the main cause of the financial crisis, and that they should be phased out within four years. This could kill investor confidence in government guaranteed mortgage securities and cause a major rise in mortgage rates.

Yet, there are some powerful interests that don't want to rock the boat too hard. The National Association of Realtors is pushing to preserve Fannie and Freddie, but as nonprofit government authorities without private shareholders.

I opt for the latter as a solution, as we need to keep investors buying-up quality mortgage securities, while keeping the spread and corresponding mortgage rates as low as possible during the stabilization of the housing market.

If you are considering a home mortgage refinance now and need some help, have questions, or need some competitive refinance rate quotes, please check out the popular Refinance Tool Box. Just give a call at 888-850-9888 or fill out a Rate Quote Request online for professional assistance without the aggressive high-pressure sales tactics.

May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Refinance Mortgage Rates and Discount Points

When quoting a mortgage rate for a refinancing homeowner, one of the first questions I usually receive is, “How many points are with that rate?” Now this would seem like a logical question because pretty much all rate quote advertising is geared toward the interest rate and how many discount points are applied. Yet, discount points versus the corresponding mortgage rate is only part of the picture.

Since mortgage discount points are paid upfront (or rolled-back in to your loan amount), they are essentially a closing cost. One discount point equals one percent of the total loan amount. So, if you are refinancing a $200,000 loan amount at a mortgage rate with one discount point applied, the discount point fee is $2,000 and applied to your closing costs.

Now here’s the dirty little secret for those that want to compare the rates among different lenders. Forget about how many discount points are being applied to your quoted rate! Yes, you read that correctly.

What you want to see are the bottom-line closing costs on a good faith estimate for the same rate, loan program, and qualifying factors from the different lenders you contact, on the same day.

As an example, suppose you are refinancing your first mortgage that has a remaining balance of $150,000, your estimated property value is $250,000, and your credit score is 745. You are looking for a 15-Year Fixed Rate mortgage. Make sure that each quote you receive is for the same variables and on the same day in order to get the most reliable comparison.

You speak with lender A, and they send you a separate good faith estimate on a 15-Year fixed rate mortgage for a 4.25%, 4.50%, and 4.75% program option. When you speak with lenders B and C, make sure to get good faith estimates for the 15-year fixed rate 4.25%, 4.50%, and 4.75% options using the same qualifying factors.

Next, you compare each rate quote by adding up all the costs and subtracting out any items for estimated pre-paids, estimated escrow deposits, estimated mortgage tax, and estimated recording fees. This leaves you with the direct bottom-line closing costs to compare among differing mortgage lenders for each rate you were quoted.

You may find that lender A quoted you the lowest discount points for any given rate, but their bottom-line closing costs are actually higher than lenders B or C. The bottom-line with tell you either way.

The weight that a discount point carries toward lowering a mortgage rate can vary among lenders, not to mention the fact that the fixed, or “third party” portion of closing costs can be significantly different among mortgage lenders.

Remember, don’t worry about the discount points, you want to know the bottom line!

If you are considering a home mortgage refinance now and need some help, have questions, or need some competitive refinance rate quotes, please check out the popular Refinance Tool Box. Just give a call at 888-850-9888 or fill out a Rate Quote Request online for professional assistance without the aggressive high-pressure sales tactics.

May the Mortgage Refinance Rates be with You!

Refinance Tool Box

15-Year Fixed Rate Refinance Still a Great Deal for Those in 30-Year Mortgages

I’ve touched on this topic before, but again want to reiterate that refinancing into a 15-Year mortgage can be a great deal for those currently in 30-Year mortgages. 15-year refinance mortgage rates are still in awesome shape, but may not be this low for too much longer. The key is that the spread between current 15-year and 30-year mortgage rates has widened over the past several months, making the 15-year interest rates extremely attractive for those with a loan timeframe of 5 years or more.

Refinancing into a 15-year fixed rate mortgage will benefit those that can comfortably handle the payment of course, but it may not be as high as you think. Lets go over an example so you can see what I’m rambling about.

Say Mr. Borrower is refinancing out of a 30-year fixed mortgage into a 15-year fixed rate home loan. He took out his original mortgage 4 years ago for $190,000 at 6.5%. His mortgage is paid down to $180,000 and he is refinancing a $180,000 loan amount into a 15-year fixed rate loan at 4.25% with no lender fee.

Mr. Borrower’s current principle and interest (P&I) monthly payment is $1,201 and after refinancing into the 15-year fixed, his monthly P&I will be $1,354. So, the monthly payment only increases $153.

The benefits for paying an additional $153 per month are quite astounding.

First, his loan term will be reduced by 11 years. (26 years remaining on current loan minus the 15-year new loan term).

Secondly, he will be saving a net total of $130,338 in interest over the term of his new mortgage. (26 years remaining on current mortgage results in $194,076 remaining interest to be paid. Total interest to be paid for 15-year loan is $63,738. $194,076 minus $63,738 equals total savings of $130,338).

Thirdly, Mr. Borrower will not be taxed on that $130,338 in savings (profit).

For those with a long-term timeframe and financially in the position to take advantage of the current 15-year refinance mortgage rates, this is really a fantastic opportunity while the interest rates last.

If you are considering a home mortgage refinance now and need some help, have questions, or need some competitive refinance rate quotes, please check out the popular Refinance Tool Box. Just give a call at 888-850-9888 or fill out a Rate Quote Request online for professional assistance without the aggressive high-pressure sales tactics.

May the Mortgage Refinance Rates be with You!

Refinance Tool Box

What are Your Home Refinance Goals?

Before a refinancing homeowner even speaks with a refinance mortgage lender, they should write down the goals hoped to accomplish for their new loan. Now this may sound funny, but once you begin your refinance search, you will most likely encounter mortgage quotes for multiple refinancing options. It is very easy to get lost in the interest rates, discount points, closing costs, and loan terms. Without an initial goal, it can be easy to refinance into a new mortgage that may not be the best fit for your specific circumstances.

For instance, is money tight, and you want to save at least $300 per month with a 30 year fixed rate mortgage. Maybe you want to consolidate all your credit card balances to save $500 per month and shorten the term of your home loan. Or, maybe you want to consolidate that first and second mortgage into one lower fixed rate and save at least $250 per month.

Maybe your refinance goal is unrealistic or maybe you are understating the actual financial benefit for a new mortgage, but it is still important to have an initial goal.

With your refinance goal in mind, next you need to determine what your anticipated timeframe will be for your new home loan. Will you be in your new mortgage for at least five years, ten years, or until the end of the loan?

With these two factors alone (goal and timeframe) you will be well armed to hit your refinance lender for some quotes.

Your refinancing loan professional should be able to quickly check current mortgage programs for your initial goal based upon your pre-qualifying factors. Some refinance lenders will also be able to give you a “breakeven” point in months for your closing costs.

So, if your goal is to save $300 per month refinancing your first mortgage into a 30-Year fixed loan and you plan to stay in your new mortgage for at least 5 years, a bottom-line quote that will save you $325 per month with a breakeven point of 22 months may be just the program you are looking for.

The point is that you will be well informed at the beginning of your refinancing process and be able to skip to the bottom-line to determine your desired benefit for your timeframe.

If you are considering a home mortgage refinance now and need some help, have questions, or need some competitive refinance rate quotes, please check out the popular Refinance Tool Box. Just give a call at 888-850-9888 or fill out a Rate Quote Request online for professional assistance without the aggressive high-pressure sales tactics.

May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Are Refinance Mortgage Rates Going Up?

I really must say that we have been quite spoiled over the past year with mortgage refinance rates hovering near historic lows for much of the span. Unfortunately, on the other side of the coin, home loan qualification has become much more difficult. Throw in a dash of declining home market values and a pinch of “Full-Doc” only refinance program offerings and those low mortgage rates have been quite a tease for a good number of potential refinancing homeowners.

A big question that I get every day is whether or when refinance mortgage rates will be going up. I never predict where mortgage rates will go, especially on a short-term basis, but try to give input about major looming factors that can have a significant impact on refinance interest rates.

One of these major factors that could cause refinance mortgage rates to rise significantly in the near future is the end of the government stimulus program aimed at keeping mortgage rates low.

The Fed has been buying mortgage-backed securities, the bundling of home loans that are used to fund mortgage lending, since late 2008. But next month it plans to complete its purchase of $1.25 trillion in mortgages. This may have an immediate impact by causing a rise to the mortgage-spread premium, a direct component of mortgage rates.

The Fed will also be ending its buying of US treasuries next month, which could cause the yield on the 10-Year bond to rise. Since mortgage rates are based on this benchmark, they would rise in kind.

Yes, we’re talking about a potential double-whammy pop for mortgage rates next month.

The extent of the rise will be anyone’s guess, especially in light of the current housing and employment picture. Unstable employment and housing are major risk factors for mortgage lenders, and they do not like risk whatsoever. Some on the street are predicting a half-point increase while others have “guessed” 6.0 percent par rates on 30-Year Fixed mortgages by the end of this year. In my opinion, predictions are futile, but you can’t ignore the major headwinds in the market.

To compound issues, is the end of up to $8,000 in tax credits for homebuyers. To qualify, buyers face an April 30 deadline to sign a sales contract. Potential rising mortgage rates and no homebuyer incentive could put a severe drag on the housing market and home values.

One bit of good news is that home prices edged up in December, the seventh straight monthly gain. If the government comes in to save the day once again by helping to keep mortgage rates stable and by extending the homebuyer tax credit program, we could be close to a bottom in housing. One would think that the government would do something to keep the housing momentum going. They have done much to prop up the housing market, and it’s hard to believe that they will suddenly let the house of cards fall again.

If you are considering a home mortgage refinance now and need some help, have questions, or need some competitive refinance rate quotes, please check out the popular Refinance Tool Box. Just give a call at 888-850-9888 or fill out a Rate Quote Request online for professional assistance without the aggressive high-pressure sales tactics.

May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Mortgage Refinance Rates Still Holding Near All-Time Lows

There really hasn’t been much to celebrate in today’s lousy economy, unless you are looking for a new home mortgage. Both home purchase and mortgage refinance rates continue to hold near all-time lows. National average interest rates for 30 year fixed mortgages are currently hugging the 5.0 percent mark, but some experts are worried that the party may be over soon.

Why are they worried?

The worry is that once the federal programs kick in just over one month for the US Treasury and mortgage-backed securities buyback program, mortgage rates could rise rather rapidly. Both the 10-Year Treasury Yield and the mortgage-spread risk premium will most likely rise after the buyback programs end. Because these are two major areas that contribute to the makeup of a mortgage rate, they may have a valid worry indeed.

The bigger question may be whether the government comes in to save the day once again by providing more funds aimed at keeping mortgage rates low. Considering that there is still no stabilization in employment or housing, one would hope that they do just that.

While many homeowners are still deciding whether to take advantage of the current low mortgage refinance rates, can you believe that teaser rates are still flourishing in email and internet advertising? You may have received some of these emails or viewed the ads, the ones stating rates anywhere from 3.0 to 4.0 percent. You may have also noticed that there is no mention of the programs offered for those rates. Hmm, could they be risky ARMs, short-term rates, or interest-only loan options? I’m guessing yes, as refinance lenders tend to shy away from giving borrowers loans at a loss.

Just remember the old say that “If it sounds too good to be true, then it probably is”. Also ask yourself if you would want to work with a lender that is baiting you in to do business with you. Now, if you are looking for a “risky” loan to take advantage of ultra-low interest rates, then that is great. But the problem with these “teaser” ads is that they are not aimed at the risk borrower. The ads are trying to lure in the average homeowner looking to refinance into a 30-year fixed rate. To each his own, but I think I’ll say “No Thank You” to lenders utilizing this advertising tactic.

If you are considering a home mortgage refinance now and need some help, have questions, or need some competitive refinance rate quotes, please check out the popular Refinance Tool Box. Just give a call at 888-850-9888 or fill out a Rate Quote Request online for professional assistance without the aggressive high-pressure sales tactics.

May the Mortgage Refinance Rates be with You!

Refinance Tool Box