Tag Archives: interest rates

Why You Should Think About Refinancing – NOW

I’m not a lender. I don’t play one on TV, I didn’t stay at a Holiday Inn Express last night, and I’m not sending three easy payments of $19.99 to be a lender. But when I see low interest rates, I pay attention, because if I know where the low rates are than my clients are probably interested.

I wrote in the beginning of June about what I thought rates might do, but what do I know?  Then, I saw this on The Today Show:

I can tell you that last week, my wife and I contacted Brandon Nicely about the possibility of refinancing our loan.  But what do I know?

Visit msnbc.com for breaking news, world news, and news about the economy

Mortgage Rates In Summer

I’ve been working with someone who recently made the comment, “well, with the tax credit now expired I expect interest rates will go down a bit more”.  I have his permission to retell this story … he just didn’t know it’d be the very day after he said it.

Yes, the first-time buyer credit has now expired.  No, the real estate market hasn’t tanked as a result.  And no, you shouldn’t be prepared for interest rates to drop, because they don’t tend to do so during the summer months.  The summer is when people like to drive – a Sunday cruise, or maybe a cross-country trip.  Increased trips means increased gas usage, which means higher prices as retailers take advantage of our need for the wind in our hair … so we’re increasing our oil usage as oil companies are reducing the amount of oil they’re exporting, and voila – an inverse and inflationary reaction in the market.  Interest rates don’t like inflation, and so they climb.

As I said last year about this time

Buy when you’re ready to buy.  Rates are out of our control as buyers, so when you’re ready to buy, talk to your agent, get preapproved, and start shopping.

Despite what the book you just picked up at the local bookstore (speaking of local bookstores) says there isn’t a game to the system.

How Interest Rates Work

Brandon Nicely wants you to know that interest rates aren’t quite as scary as one would think.  Here’s a video to prove it:

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Brandon is a branch partner at Alcova Mortgage. He enjoys doing his taxes, firewalking and competitive eating, but not necessarily in that order. You can reach him at brandon@alcovamortgage.com, or 877-552-7150.

Are You Broke Or Stupid?

The title of this post is a bit shocking, no?  I pulled it from an article posted at BusinessWeek.com last week entitled “If You Don’t Buy A House Now, You’re Stupid Or Broke“.  Do I believe you’re broke?  I hope not.  Do I believe you’re stupid?  No, although I’ve certainly been called worse.  Nevertheless, the title still makes you stand up and take notice.

30-year mortgage rate average

If you have a few moments I’d encourage you to read the whole article; Marc Roth talks about the historical lows that interest rates are at, and gives some insight into how they’ve arrived at these levels.  While I find the constant yelling “interest rates have never been lower, buy now!” a bit tiresome and insincere given the current economic climate, the truth is that they’ve never been lower, and Marc gives a good visualization of that.

Where the post really resonates though, is when you look at the true costs of a loan at today’s interest rates.  Check out the section beginning at “Loan Costs”:

We are at 5%. As you can see by the graph above, as the economy stabilizes, it is reasonable for us to see 30-year fixed rates climb to 6% within the foreseeable future and probably to a range of 7% to 8% when the economy is humming again.  If every quarter of a point is worth $12,000 per $200,000 borrowed, then each point is worth almost $50,000.

Let’s put that into perspective. You have a good stable job (yes, unemployment is at 10%, but another way of looking at that figure is that most of us have good stable jobs). You would like to own a $240,000 home. However, even though home prices have steadied, you may be thinking you can get another $5,000 or $10,000 discount if you wait (never mind the $8,500 or $6,500 tax credit due to run out next spring. Or you may be waiting for the news to tell you the economy is “more stable” and it’s safe to get back in the pool. In exchange for what you may think is prudence, you will risk paying $50,000 more per point in interest rate changes between now and the the time you decide you are ready to buy. And you are ignoring the fact that according to the Case-Shiller index, home prices in most regions have been trending back up for the last several  months.

If you are someone who is looking to buy or upgrade in the $350,000-to-$800,000 home price range, and many people out there are, then you’re borrowing $300,000 to $600,000.  At 7%, the $300,000 loan will cost just under $150,000 more over the lifetime, and the $600,000 loan an additional $300,000, if rates move up just 2% before you pull the trigger.

Am I suggesting everyone should buy a home right now?  Absolutely not, but it’s helpful to see what buying a home at today’s fixed rates (not a resetting ARM) will mean in dollars.  It’s also a good starting point for those planning on buying a home in the future, but not necessarily right now, as you can use his figures.

I can’t think of a clever way to end this post, and so I’ll just end it here.  Maybe some of those people were right when they called me stupid. 🙂

Is The Real Estate Glass Half Full Or Half Empty

2767938103_530e7206b2The all time closing high of the S&P 500 was 2 years ago, when in October of 2007 it closed at 1565.  On Friday, October 9 2009, the S&P closed at 1071, 32% lower than the all time high just 2 years earlier.  HOWEVER … IT IS 58% HIGHER THAN THE 3/9/09 BEAR MARKET LOW CLOSE.

We are always looking to the positive or negative and this is no different as some individuals are still talking about the 2007 market.  We really can be thankful of the turn around since March, and the same is true with rates.  Everyone is talking about how easy it was to get a mortgage 2 years ago and the process was so much smoother.  Well today rates are at historic lows, there are still mortgage programs available and home prices are at the lowest point in years.  Did I mention if you are a first time buyer you get $8k just for buying a home that in several cases can be purchased with no money down?

I leave you with some words from Warren Buffett “be fearful when others are greedy and be greedy when others are fearful”.

Photo from kjarrett on Flickr.

Brandon Nicely

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Brandon is a branch partner at Alcova Mortgage.  He enjoys doing his taxes, firewalking and competitive eating, but not necessarily in that order.  You can reach him at brandon@alcovamortgage.com, or 877-552-7150.

How Does Inflation Correspond With Interest Rates?

If you remember, I mentioned two weeks ago about the Federal Reserve stopping the purchasing of mortgage backed securities and how this will effect rates in the future.  Well, we got some more news about rates last week.

Ben Bernanke, the Federal Reserve Chairman, said the Fed will be very vigilant to protect against inflation.  You may wonder why that would impact interest rates?  Inflation is the arc enemy of interest rates, and will push them higher, and all signs lead to higher rates over the next 2 years.   The bottom line is that rates are already on the rise, and more than likely we will not see rates this low again in our lifetime.  Keep in mind at this point in time rates are still very near historic lows – George Washington could not have gotten an interest rate as low as they are today, and this is huge if you are looking to buy a home.  The difference between a monthly payment at 5% and a monthly payment at a rate of  7% can be as much as $320 per month (based on loan amount of $250k).

Brandon Nicely

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Brandon is a branch partner at Alcova Mortgage.  He enjoys doing his taxes, firewalking and competitive eating, but not necessarily in that order.  You can reach him at brandon@alcovamortgage.com, or 877-552-7150.

Federal Reserve and What It Means For Interest Rates

Allow me to introduce Brandon Nicely, branch partner in Alcova Mortgage here in Blacksburg.  The mortgage industry is literally changing on a daily – and sometimes hourly basis – and Brandon’s going to be bringing us the straight talk on what’s really going on in the industry, what’s happening with rates, and what to expect going forward.  And we’re going to hold him to every word, it’s as good as gold!  Okay … we’ll give him a little leeway.

He’ll be posting things here on the blog from time to time, if there’s something you want to know, email me and it’ll be passed along!  What should we call this series of posts?  Some NRVLiving swag for the winning entry!

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The Federal Reserve was at it again last week making some big decisions for the future of home loan rates. The Federal Reserve made the announcement that there would not be any additional buying of mortgage backed securities past the first quarter of 2010. There had been speculation about the Fed increasing the purchases of Mortgage Backed Securities, but the meeting last week confirmed there will not be any more purchases of securities.

So what does all this Federal Reserve stuff mean and why is it important?

These statements by the FED means interest rates will climb between now and the first quarter of 2010. This will put us back in a normal market where the Federal Reserve is not buying securities to keep rates down. Rate increases will most likely climb above 6% but hopefully stay in the 6-7% range.

With some more positive news from the Housing industry inventory from unsold existing homes fell to lowest level since April of 2007 and existing home sales reports continue to show signs of improvement.

Don’t forget first time homebuyer tax credit will expire November 30th.

Brandon Nicely

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Brandon is a branch partner at Alcova Mortgage.  He enjoys doing his taxes, firewalking and competitive eating, but not necessarily in that order.  You can reach him at brandon@alcovamortgage.com, or 877-552-7150.

What Do Mortgage Rates Do In The Summer?

thermometerAccording to Dan Green of TheMortgageReports.com, they go up.

I’d heard someone once say that gas prices often reflect what’s going to happen with mortgage rates, and Dan not only reiterated the same, but why.  It’s an interesting correlation, and one I’ll be watching more in the future.

They – gas prices OR mortgage rates – don’t seem to be cooling off anytime soon, so there just might be something to the idea.

But Marianne Lane of Coldwell Banker Mortgage says she’s seen the opposite effect in the last 15 years, that often rates in July and December are lower than they have been at other times of the year.

Your takeaway?  Buy when you’re ready to buy.  Rates are out of our control as buyers, so when you’re ready to buy, talk to your agent, get preapproved, and start shopping.

Are Interest Rates Good?

It seems I keep getting asked “how low are interest rates right now?“, and I keep getting quizzical looks when I respond:

The lowest they’ve ever been.”  Well, the lowest they’ve been in 30 years.  I’m serious.

The Virginia Association of REALTORS put the following graphic together, with information from Freddie Mac:

Graph of interest rates

You can download the whole PDF here – http://www.varealtor.com/LowRates.

Like a lot of you, I find the line “there has never been a better time to buy” a bit insincere, when so much is being made of what’s negative in the housing market.  Nevertheless, the truth is that rates are the lowest they’ve been in 30 years, and if it makes sense for YOU then it’s a good time to buy.