Hello and welcome to this week’s edition of Moorings. Once again the main topic of conversation continues to be the United States Debt Ceiling which has still yet to be increased. The heat is definitely on legislators on both sides of the political aisle to come to a compromise and put this issue behind us. It only takes a look at what is happening in Europe these days to understand why it’s crucial that the United States finds a solution to the debt ceiling issue. Not only have eight European banks recently failed a stress test, but last week there was news that Greek, Italian, Portuguese, and French “credit default swaps” (which are insurance policies against default) were trading at record levels. While the European Union is continuing to work to contain Europe’s debt problems and prevent a default in Greece (and elsewhere), these events bode a very important lesson for the US.
Why? Because solving our debt ceiling debate and finding a long-term plan for lowering our deficit and being fiscally sound will raise confidence in our debt and help the US keep its AAA credit rating from the various credit rating firms like Moody’s and Standard and Poor’s. This will help investors continue to see the US as the ultra-safe haven for their money, which is a key aspect of our continued economic recovery.
Speaking of our economic recovery, there was actually some good news last week in the housing industry, as Building Permits and New Construction Starts were reported better than expected. While this is only one small piece of the puzzle, we’ll take every bit of positive news we can.
With that being said, interest rates continue to be at their lowest levels ever. A client looking to purchase or refinance a home with a thirty year fixed conventional mortgage can expect an interest rate of approximately 4.75% as of Monday. While this is a slight quarter percent jump from last week’s low of 4.5%, this is still a huge bargain for anyone looking for a home loan. It astounds me that we still have clients calling up who haven’t already refinanced their home when their rate is in the fives or even occasionally the six’s. The savings they get on a yearly basis is often in the thousands of dollars, not to mention the tax-benefit. Speaking of which, I thought I would bring up a conversation I recently had with a friend who wanted to pay off their thirty year mortgage as quickly as possible. He had a plan to pay it off in seven years by doubling up on payments and refinancing to a fifteen year. While this may be best for some, I would highly recommend that anyone considering paying off their mortgage talk to their CPA or tax specialists to determine if it’s really in their best financial interest. Well that’s it for this week, until next, Be Blessed and Numbers 6:24-26 be on you.
Hello and welcome to this week’s edition of Moorings, your source for local and national news from the Mortgage Industry. Let’s jump right in to rates which have come down yet again to 4.5% for a thirty year fixed conforming loan. This is an exceptionally good deal for anyone looking to purchase or refinance a home. Rates have only been this low a handful of times in the history of the mortgage industry and anyone who doesn’t take advantage of this opportunity will surely regret it. As to why rates are so low, we jump over to the national economic news.
Obviously the biggest story on the news of late has been the ongoing struggle between democrats and republicans to agree or not to agree on whether or not the debt ceiling of the United States should be extended. In the simplest terms, this is a limit as to how much debt the country can go into, and congress must approve the end amount of debt allowed. With major economic issues like this that negatively impact the economy, investors move their money from riskier arenas like the stock market into more secure investments like mortgage backed securities. With this move come lower interest rates as there are more buyers of these packaged securities and therefore less risk.
On a separate topic, I wanted to discuss a rarely used loan program called Pledged Asset. This is a great program for borrowers looking to purchase or refinance higher value homes, whose assets and income may not be your standard W-2 income. A good example of a use for this program is a client with a great deal of money in stocks, bonds, mutual funds, etc., but they don’t necessarily have tons of cash on hand to buy a home. By utilizing this creative loan program, the client can “pledge” their assets that are tied up (and not normally utilized) as collateral when purchasing a home. This saves a client from needing to make liquid their investment portfolio which will inevitably make them more money than cash. In addition, a client can pledge their assets for another person such as a child or parent, you can get financing up to 90%, mortgage insurance may not be required in some cases, and you can defer capital gains since the investments are staying in place. Loan programs like this are designed for a borrower with a more complicated asset and income structure and it makes it all that more important for such a client to work with an experienced mortgage banker. When you are discussing making a huge investment such as a personal residence or vacation home, make sure your mortgage advisor knows the ins and outs of the guidelines of your mortgage program. At the end of the day it’s your name on the mortgage and you are responsible for it, so be comfortable with the decisions your making and the contracts you are signing. Well that’s it for this week, until next, Be Blessed and Numbers 6:24-26 be on you.