Skip to main content

Posts

Showing posts from April, 2011

Why is the term important?

By
As the saying goes, "The lowest rate will save you hundreds, but the wrong term can cost you thousands." Put another way, the mortgage term you choose can have a far greater impact on borrowing cost than your up-front interest rate. That’s because your term determines the length of time you're locked into a rate. That, in turn, affects how long you'll overpay or underpay, relative to the other available options. The wrong term can get mighty expensive if interest rates deviate from your assumptions, or if you need to break your mortgage early. It therefore pays to make the right choice from the get-go. Almost anyone can find a low rate by doing a little Googling. Picking the right term is not as easy. Take some time, get good advice, and nail the right term the first time. The venerable 5-year fixed still wins popularity contests, especially since high-ratio qualifying rates leave many with no other choice. However if you can afford to take some risk, it will be worth...
Post a Comment
Read more

Is the lowest mortgage rate the most important?

By
IS THE BEST MORTGAGE RATE IMPORTANT? Mortgage clients constantly tell me "I need the best mortgage rate. What rate do you offer?" While the client is always right, and we always provide the best rate and terms, we do convey the need to look at the "extras" when selecting the best mortgage. Extras include: •Low prepayment penalties •Generous pre-payment privileges •Cash back •Cash back clawbacks •Assume-ability •Portability •Refinance options •Low lender fees (if applicable) •Missed payment flexibility •Payment frequency flexibility •Lock in terms (for variable rate) Clients are attracted by even a 0.1% savings in mortgage rates. But when you do the math, the relative importance of the "extras" become clear. 0.1% savings on the typical 5-year $250,000 mortgage equates to: •A difference in monthly payment of only $14 •A savings of just $346 over five years on your mortgage balance Just one of the extras above could offset this 10 times over.
Post a Comment
Read more

Cut years off of your mortgage

By
Here are a few simple ways to literally cut years off of your mortgage. The first and most obvious one is to choose a smaller amortization period. Taking a $100,000 mortgage at 5% from a 25 year amortization period to a 15 year amortization period will save you $32,619.21 in interest cost over the life of the mortgage. You may also consider increasing your monthly payments. Every little bit helps. On a $100,000 mortgage with an interest rate of 5%, increasing your monthly mortgage payment by just $50.00 per month will pay that mortgage off in just over 21 years as opposed to 25 years. Another idea is to make lump sum payments. On a $100,000 mortgage at 5% interest, making one extra payment of $500 a year will reduce your amortization to 22 years from 25 years. The most common change is to the frequency of your payments to bi-weekly instead of monthly. On a $100,000 mortgage at 5% interest you will cut back your amortization to 21.5 years instead of 25.
Post a Comment
Read more

Rising Bond Yields Pressuring Fixed Rates

By
The 5-year government yield (which leads 5-year fixed mortgage rates) pierced 2.80% on Friday. It’s risen almost .35% in two weeks. That’s squeezed gross lender margins on deeply-discounted five-year rates to near 1.00% (1.20% can be considered “normal”). As a result, ultra-low fixed rates are in danger of rising .10% or more higher, especially if this yield trend continues. The 5-year rates are still at all time lows, but they may not last if this trend continues. Keep in mind; this perspective refers to fixed rates in the short term. Although rates continue to trend upward, they can drop down unexpectedly due to unforeseen circumstances as we saw recently. Should interest rates continue to rise as predicted; now is an optimal time to get a pre-approval done and secure a low rate for the next 120 days.
Post a Comment
Read more