Tuesday, November 30, 2004

Home Equity Loans Gain Attention Over Refinancing

While the economic expansion continues to broaden, inflationary pressures are sending interest rates up.

The demand for mortgages declined during the week ending November 19, 2004, with the MBA index decreasing by 5.7% to 715. Both the refi and purchase components of the index fell. MOrtgage activity appears to have increased according the Mortgage Loan Search Network at http://www.mortgageloansearch.cc -

Consumer appear to be opting for home equity loans and cash out mortgage refinancing programs. Consumers seem to see this as a way to acquire funds for seasonal purchases and to cut down personal debt.

The greenback remains vulnerable. Clear path to further declines in the dollar.

Freddie Mac announced new maximum loan limits for next year. They said that they will purchase loans for single family homes up to $359,650, a sizable increase from this year's $333,700. Fannie Mae will likely follow suit in the next day or so. This would mean that borrowers can avoid jumbo rates for loans up to $359,650, which is approximately .375 of a percent higher than conforming rates.

Sunday, November 14, 2004

Home Refinancing Tips

Home Refinancing Tips

Tip 1. Don't wait until mortgage interest rates drop by 2 percent before you consider refinancing your mortgage.

The decision to refinance your home is dependent on many things, including how long you plan to be in the house, how much lower the interest rate will be on your new loan, the closing costs for the new loan, your equity position in the home, and whether you plan todo a cash-out refinancing.

Tip 2. Using your current mortgage service may or may not save you money and time. The mortgage market is divided into three lines of business: mortgage origination, mortgage servicing and mortgage lending.

If the firm that originated your existing mortgage didn't retain the servicing, then you aren't a current customer. If the firm servicing the mortgage doesn't do originations in your market, then they may not be interested in your business.

It's best to use online lending marketplaces as these specialize in such issues and are equipped to provide services needed at competitive rates.

Tip 3. Many lenders require that you have at least 10 percent equity in your home (i.e., a loan-to-value (LTV) ratio of 90 percent or less). But when using the online lending marketplace consumers are connected to lenders willing to underwrite loans in which the borrower had only 5 percent equity in the home. Beware, however,that low equity loans can involve relatively high mortgage insurance costs.

Friday, November 12, 2004

How Fed Hikes Impact Long Term Mortgage Long-term rates generally rise to some degree as the Fed tightens monetary policy, particularly when it's clear that the Fed is embarked on an extended tightening process.

Between June 29 and Sept. 22, the 10-year Treasury yield declined by 65 basis points while the federal funds rate rose by 75 basis points. At that time we saw long term rates plummet and short term rate rise.

How could this happen? First, evidence of the mid-year "soft patch"in real economic growth; second, the slowing in core inflation from the surprising acceleration earlier in the year; and third, lower probabilities of aggressive tightening by the Fed down the line.

The "soft patch" is becoming passe, and the transitory factors that boosted core inflation earlier in the year apparently have unwound. That said we now see mortgage rates rising steadily and can expect this to continue as the Fed execute further rate hikes in the months to come.

If the hikes are small and spaced consumers have a chance to lower mortgage interest rates on long term home loans by refinancing at low rates points and fees and take advantage of a rapidly shortening window of opportunity to get back future income loss. 

Thursday, November 11, 2004

In The News: The Fed's meeting statement revealed that the committee had raised its target forthe feds funds rate by another 0.25%, lifting it to2.00%. The hike is part of a credit tightening campaign to bring rates back up to more normal levels now that the economy's recoveryfrom the 2001 recession is more deeply rooted.

Tip of The Day

Cash out refinancing may help assist consumers during the heavy buying season. Many borrowers stretch the funds out over several buying seasons as much as five years or so while including things like funding a business, providing a second income, saving for college tuition and investment funds. In this way cash-out refinancing proves to be a smart investment in ones future.

When refinancing your home saving money by lowering interest rates,monthly payments and saving thousands of dollars over the life ofthe loan is of primary concern.


When faced with the need to compare different rate/point combinations among lenders, first convert each quoted rate to one based on a constant number of points and then find the lender with the lowest rate. In making this conversion, consumers should use a traditional rule of thumb that equates each point to a 1/4 of 1percent change in the interest rate. This would make an 8 percentloan with 0 points equivalent to a 7.75 percent loan with 1 point.


Lenders who lure you with no costs at application can lay the fees on heavily at closing. Keep your eyes focused primarily on the interest rate and points. 

Wednesday, November 10, 2004

Mortgage Rate Watch - Rate Shopping Tips
The News:Fed Boosts Interest Rate One-Quarter Point The Federal Reserve hiked a key short-term interest rate by one-quarter percentage point Wednesday, the fourth increase this year.It's part of a credit tightening campaign to bring rates back up to more normal levels now that the economy's recovery from the 2001 recession is more deeply rooted.

Tip of The Day
Mortgage rates are likely to continue climbing if the bond market anticipates more rate hikes. 1 year adjustable rate mortgage will feel the impact of a rate hike. Home equity loans, HEL's, are notimpacted by rate hikes.To find loan programs and lenders that may fit your criteria.

Monday, November 1, 2004

Mortgage Refinancing Rates Hit Six Month Low

Long-term mortgage rates are at a six-month low nationally, with the average 30-year fixed-rate mortgage falling to 5.64 percent, down from last week's 5.69.

The lower mortgage rates have spurred sales of both new and existing homes, which climbed in September to the third-highest levels in history.

Housing affordability remained historically high in September. Last week, the refinance share of overall mortgage activity inched up from 44.5 percent to 45.6 percent, according to the Mortgage Bankers Association. From the look of current rates and the fact that housing purchases are heading for a seasonal decline now is probably a good time for homeowners to refinance to consolidate debts or cash out equity.