Monday, December 01 2014
You’re at home watching TV and trying to unwind, when all of a sudden here comes another baby boomer celebrity, looking into the camera, giving you his most sincere, trustworthy look, then assuring you that a “Reverse Mortgage” really isn’t too good to be true (even though it sounds like it is).
What could be better? Any homeowner 62 or older can apply: then the bank pays you instead of the other way around! You could even use part of the tax-free proceeds to pay off the other mortgage! Or go to Monte Carlo and break the bank! (The trustworthy celebrity only hints at that one). You don’t have to pay back the loan until blah blah blah, the property remains yours, etc. etc. etc. What could go wrong?
Short answer: quite a lot, actually.
Long answer: if you don’t plan for the long term consequences, this can be a potentially disastrous maneuver. As a quick and painless way to raise cash, it often is too good to be true.
For openers, the actual name of this loan is not ‘reverse mortgage’— it’s an HECM, Home Equity Conversion Mortgage—a much more descriptive name. It allows 62+-year-olds to ‘cash out’ the equity they’ve built in their home. Not all of the equity; just some. As soon as they no longer live in the home, the loan must be repaid in full. The problems are all in the details.
Detail 1: Payback
Suppose a husband and wife live in a house owned by the husband. He applies for reverse mortgage, dies 11 years later, leaving the house to his wife. Because the reverse mortgage becomes payable when the mortgagee (the husband) “leaves” the property, the loan becomes due and payable. So the spouse may be forced to sell the home in order to repay the loan. But it’s also possible that the same thing occurs when the mortgagee is permanently relocated to a nursing home.
Detail 2 (and it’s one you really have to take into account): Interest
Most often, no payments are made on reverse mortgages. Unless the trip to Monte Carlo ended well, it’s likely that the balance owed remains. However, interest accrues on the loan at the “prevailing rate”—which may be a misnomer, because reverse mortgage interest rates are often high. Over the long run, the amount owed could eat up most of the value of the house. The spouse could be left with very little to live on.
While the fees charged for a reverse mortgage are capped by the government, they’re still much higher than those for traditional loans (possibly why the trustworthy boomer celebrity got involved in the first place). Because credit scores aren’t used to determine eligibility, higher fees are charged to help cover lender risk. Then there are requirements for keeping up the property (what if illness causes a temporary lack of attention?), paying taxes on time…and other circumstances that could cause the loan to be called in, forcing sale of the home.
Yes, a reverse mortgage can be a valuable resource for some retirees on limited incomes. However, before even thinking about committing, it’s vital to sit down with a trusted financial adviser. If it turns out that selling or downsizing makes a lot more sense, calling me is the next step! You can reach me on my cell phone: 812-499-9234 or email: Rolando@RolandoTrentini.com
Monday, July 15 2013
For Evansville homeowners and soon-to-be homeowners, it looks like the end for deeply depressed mortgage rates. Nationally, rising rates have temporarily created a downdraft in home loan applications.
According to the Mortgage Bankers Association, mortgage applications fell 4% in the first week of July after plummeting 11.7% the week before. ‘The Market Composite Index’ is the measure of mortgage loan application volume — and it decreased 4.0% from a week earlier (on a seasonally adjusted basis). Altogether, national mortgage applications so far this July are about a third below their level of a year ago.
The drop in applications comes as no surprise to those of us who keep a steady watch on mortgage rate trends. But there is one accompanying fact that wouldn’t have been as predictable. As USA Today notes, “Despite the rise in rates…the four-year average for home purchases continues to climb since it turned upward in November 2011.”
So what do these apparently contradictory stats mean for local residents preparing to sell or buy a house?
Whichever part of the equation you fall into, it’s certainly time to get moving! If you’re considering selling, you will want to put your home on the market to take advantage of the still historically low mortgage rates. It’s often the case that rising mortgage rates spur a last-minute home-buying rush. If you’re planning on buying in, rising mortgage rates are a pretty good indication that it’s time to put the pedal to the metal.
Either way, if you’re thinking of buying or selling in Evansville this summer, I’m standing by to lend a hand. Give me a call to discuss the full picture — including the latest price movement in area neighborhoods. You can reach me on my cell phone 812-499-9234 or email Rolando@RolandoTrentini.com
Monday, April 29 2013
When the Wall Street Journal or Forbes run mortgage rate stories as their lead items, those of us who keep an eye on the local real estate market pay close attention. I frequently share what they say here. But when even the non-financial outlets like USA TODAY and the cable TV news channels give top billing to real estate market news, it’s a real attention-grabber.
That’s what happenedlast week. USA TODAY’s online headline focused on the 15-year fixed mortgage rate, “at a record low 2.61%.” The cable news channels talked about record low rates, too (although if you hit the ‘pause’ button long enough to read the TV graphics, you saw that the national average for 30-year loans was still a shade away from the actual record low).
Never mind that; it’s still surprising that mortgage rates continue to linger at such tempting lows.
The reason is hardly a secret: the Federal Reserve is holding rates down to energize the real estate market — a key element of the overall economy. Yet, with existing home sales notching up in the first quarter at the briskest pace in four years, you would have thought that mortgage rates would have been loosened up at least somewhat. And with new home sales doing their best since 2008…
Of course, it doesn’t matter what anyone expects: the results of dipping mortgage rates is just plain good news for everyone in theEvansvillereal estate market: buyers and sellers alike. Those low mortgage rates act to offset the rising U.S. house price index. The result for buyers is a more valuable home without the expected increase in the monthly payment. What more of an inducement to enter the real estate market could there be?
In short, if you’re considering whether it’s time to buy (or to sell your current home and trade up without busting the household budget), last week’s national and local market signs are even clearer than they have been recently. There are definitely opportunities out there! Why not give me a call for an up-to-the-moment real estate market evaluation for your property? You can reach me on my cell phone at 812-499-9234 or by email Rolando@RolandoTrentini.com
Wednesday, April 10 2013
Lenders are more optimistic about the direction of the housing recovery, with 71 percent recently surveyed saying home prices are “rising at a sustainable pace,” according to a quarterly survey of U.S. bank professionals conducted by FICO.
Nearly 60 percent of the bankers surveyed say they expect the supply of credit for residential mortgages to meet demand over the next six months.
What’s more, 39 percent say they expect mortgage delinquencies to fall in the next six months, while 45 percent of those surveyed say they expect delinquencies to remain flat. According to FICO, that represents the most optimistic data on delinquencies in the 12 quarters since the survey began.
"The latest survey results, combined with data that indicates the real estate market is improving in many regions, paint a positive picture for a sector of the economy that has been slow to join the recovery," says Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. "Mortgage lenders have been understandably guarded over the past five years. The improvement in their sentiment should be welcome news, and I wouldn't be surprised to see lenders cautiously expanding their mortgage and home-equity lending businesses."
Wednesday, March 13 2013
Your mortgage: you only think about it once a month (if you’re on autopay, maybe not even that often). Why worry about it? If it ain’t broke, don’t fix it, right?
Like all aspects of your big-picture financial planning, keeping an eye on that mortgage can be an extra wealth-building move. I can point to three reasons why re-evaluating your mortgage could pay dividends:
Down, Down, Down…
Ok, with interest rates continually making headlines, this one might be a no-brainer. But some folks don’t realize just how attainable significant savings may be: a drop of just a single percentage point in themortgage rate can make a gigantic difference. A general rule of thumb is that if you can lower your interest rate by a percent or more, it usually makes sense to refinance. It’s certainly worth looking into.
Pay More Sooner (Build Wealth Quicker)
Nobody wants to part with more hard-earned cash than necessary, but extra money out now can wind up saving a lot of greenbacks later. Making just one extra payment a year will have you owning your home free and clear sooner – whereupon those payment dollars become yours!
Sound too painful? It needn’t. See if you can set up bi-weekly payments of half your monthly mortgage amount. You'll be making 26 payments annually: the equivalent of 13 monthly payments! Confirm with your lender that the extra payments go toward principal.
Eye That Equity
If you’ve got a PMI payment, you know that extra insurance doesn’t come cheap. So why make the extra payment a single month longer than necessary? By law, your lender is required to stop charging you PMI after you accrue 22% equity in your home. But in many cases, once you hit 20% equity, simply writing a letter to your lender will prompt them to allow you to stop paying PMI then and there.
For most of us, our home in Evansville is one of the largest investments we’ll ever make. Got a real estate question? I’m here all the time to supply you with friendly help and advice! You can reach me on my cell phone 812-499-9234 or by email Rolando@RolandoTrentini.com
Friday, January 18 2013
Your home buyers have gotten approved for a mortgage and now they’re just waiting to make it to the closing table. Make sure they don’t throw their loan approval into jeopardy by making one of these common mistakes:
Source: “How to Keep Your Mortgage Approval Approved,” Realty Times (Jan. 14, 2013)
Monday, October 01 2012
Getting a mortgage refinance has seldom looked more attractive than it does this October. Ads for seemingly ridiculously low teaser rates are popping up all over the place -- and even if the closing costs are hefty (many aren’t), the underlying rates make them all but irresistible.
But do you qualify? Some folks don’t realize that a refi can be just as tough as getting a mortgage in the first place. Or tougher. One client has a stunning property, top credit, and a guaranteed income stream that was more than adequate to fund the refi. She put together all the required paperwork, hosted an inspection (the inspector told her, ‘this is the finest property in the area’), and then waited a week before being told she had failed to qualify. Why? Because her place had a guesthouse -- and that particular loan program was for single dwelling properties only!
The lesson here is that it pays to ask all sorts of questions before actually applying for a specific refinance offer; in other words, kick the tires! Nevertheless, when all is said and done, locking in lower monthly payments can still be worth the trouble.
You will want to present a solid picture -- one that shows that you are financially stable with a good credit rating. Getting any kind of a mortgage is twice as hard if there are significant issues in your credit report or instability in your employment history.
Of course, the basic math has to work, too. The more income you have, the more the lender will be willing to lend. If you are married, you can opt to borrow as a couple so that your joint income is considered. Since the lender will factor in your debt load, subtract your monthly from your income number: if the remainder is healthy, the lender will see that, too.
Lastly (and of key importance), your home will need to appraise for the loan you desire. Although a resurgence in property values seems firmly underway, some neighborhoods have had time to show those rising values, and some not. I can help you get an idea of how the ‘comps’ in your part of town have been faring recently – good to know when you are getting a mortgage or refinancing an existing one.
The bottom line? Getting any type of mortgage in Evansville requires all the usual suspects. Reliability and predictability are really the key here. If you are tempted by today’s record rates to try to refinance, contact a reputable mortgage broker to go over your options. As always, please consider me your local real estate resource – call me if you need an introduction!
You can reach me on my cell phone at 812-499-9234.
Friday, September 14 2012
The Federal Reserve announced Thursday that, in an effort to re-ignite economic recovery, it was taking aim at mortgage rates — a move that will likely take rates even lower from their current record lows.
The Federal Reserve announced it will purchase $40 billion of mortgage-backed securities that will help boost the recovery in the housing market. What’s more, the central bank said that it will continue with the purchase program until the economy shows greater improvement, particularly with unemployment.
"These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative," according to the Fed in a public statement.
The Fed says the economy still has a long way to go toward recovery. The Fed predicts the jobless rate will stay above 7 percent well into 2014 and that economic growth will remain slow in the coming months.
At its Thursday meeting, the Fed left its funds rate unchanged at near-zero, but announced the rate — which has a bearing on mortgages — would remain at "exceptionally low levels" until at least mid-2015.
As mortgage rates sink lower, home shoppers have been taking advantage. The Mortgage Bankers Association announced this week that mortgage applications for home purchases were up 8.1 percent for the week ending Sept. 7. Mortgage applications for purchases also were up 7 percent from year-ago levels, MBA said.
"While low interest rates impose some costs, Americans will ultimately benefit most from the healthy and growing economy that low interest rates promote," Fed Chairman Ben Bernanke said Thursday following the Fed committee’s meeting.
Source: “Fed Pulls Trigger, to Buy Mortgages in Effort to Lower Rates,” CNBC (Sept. 13, 2012)
Thursday, September 13 2012
Millions of Americans have refinanced their mortgages as rates have dipped to new lows.
However, mortgage lenders say: If home owners had shopped around more, they probably could have snagged an even lower rate and more savings.
Many borrowers settle on the first rate they're quoted, lenders say. LendingTree says that rates can vary by more than a percentage point for a borrower looking for a 30-year fixed loan.
Mortgage Daily illustrates the loss to the customer in the following example: "A consumer with a credit score of 759 and a loan amount of $260,000 might have received quotes from lenders in early August ranging from 3.25 percent to 4.625 percent. By choosing the lowest rate, the borrower would save $214 a month, $2,568 a year, and nearly $74,000 over the life of the loan."
Fewer than half of home owners say they shopped around when refinancing their loan, according to a survey by Harris Interactive of more than 1,000 home owners. On the other hand, 9 in ten American adults say they compare prices when shopping for major purchases.
"Consumers need to be engaged," says Doug Lebda, chief executive of LendingTree. "A lot of them are just happy to have it over with rather than hang in there to get the best deal."
Source: "Mortgage Shoppers Sell Themselves Short," Mortgage Daily (Sept. 10, 2012)
Wednesday, July 11 2012
About this time a year ago, I was pointing out that with Evansville mortgage rates at near historic lows, the opportunities for first time home ownership had seldom been better. Although, as always, there is a lot more to a family’s decision than the cash flow dimension, it’s undeniable that those who took advantage of low mortgage rates in 1993 could look forward to spending the next 30 years making the their friends and neighbors feel like they’d missed the boat. When you are paying 6.8% for your home while yournext door neighbor -- who bought just one year later -- is struggling at 9.2% every month, it’s no wonder your car looks a lot newer. And why you’re always jetting off to exotic vacations while they check out the latest “staycation” bargains.
That was what was happening a year ago, but this year is different. I can no longer tell you that mortgage rates are at near historic lows.
That’s because last week, mortgage rates hit absolute historic lows!
According to Freddie Mac’sPrimary Mortgage Market Survey, 30-year fixed-rate mortgage rates (FRM) averaged 3.62%. There were other bottom-scraping stats in the same report, including the average of 0.8 point (with an asterisk that points out that closing costs vary); but the real headline-maker was that further drop in mortgage rates. Down from 4.6% a year ago. That’s an all-time low in Freddie Mac records – and they go back to 1971.
"Recent economic data releases of less consumer spending and a contraction in the manufacturing industry drove long-term Treasury bond yields lower over the week and allowed fixed mortgage rates to hit new all-time record lows," said Freddie Mac's chief economist, Frank Nothaft, quoted in the July 5 release.
You can bet that Evanville buyers and sellers are listening. If previous talks of a housing recovery haven’t been enough to motivate first-time buyers or investors to jump into the market, mortgage rates like these often do the trick. And if you are on the oppositie side of the home-selling equation, weighing the best time to sell your Evansville home, this might be the signal you’ve been waiting for. Record-breaking low mortgage rates (and corresponding headlines) can help breathe life back into any market, including Evansville home sales. Properties that are properly priced and well-marketed stand the best chance of taking advantage of an invigorated market.
Every market is different, and often vary from neighborhood to neighborhood. Call me if you want to chat about market updates and how they might affect your individual outlook. You can reach me at 812-499-9234.
Thursday, June 21 2012
Until recently, reverse mortgages were considered the “Wild West” of retirement planning, writes a Wall Street Journal article published this week. But today, many more planners are using them to create a stream of income or a cushion against market declines.
WSJ speaks with two financial planners including Harold Evensky, co-author of a study at Texas Tech that has brought reverse mortgages into recent headlines. The article writes:
Wednesday, March 14 2012
The subprime mortgage crisis and the resulting haymaker it dealt the entire housing market has caused noticeable changes in how Evansville homeowners look at mortgage rates and the loans they negotiate.
The intense media focus on the residential financing industry has caused everyone to pay closer attention to the form of home loans they arrange. The truth is that borrowers are more wary about the loans they choose. They are insisting on clarity in how their choices will pencil out in dollars and cents in both near and long terms.
One decision that determines what mortgage rates wind up on Evansvillebottom lines is whether to ‘buy down’ mortgage rates with points. Points represent interest that buyers pay up front to lower the rates on the remainder – the mortgage rates that show up at the bottom of our monthly statements.
Increasingly, Evansvillebuyers are shunning the points option.
There are many reasons for the shift. Some are clearly related to the subprime mess, but others less so. Many of today’s buyers are entering the market for the first time, and they are cash-strapped. They may find it a struggle to come up with money for the down payment and closing costs. Often, these new homeowners simply can’t afford to pay points -- even if they can be rolled into the loan.
Historically low interest rates are another reason buyers at all levels are thinking harder about points vs. mortgage rates. Last week’s national average on 30-year fixed mortgage rates 3.88% was a full percentage point lower than a year ago – when it was already visiting the basement! Some buyers just don't see the value in making an advance interest payment – financed or otherwise – when it may only knock a fraction of a percent off an interest rate that's already at such low levels.
First-time homebuyers can also see points as an unnecessary expense if they do not plan to stay in their homes long enough for the lower mortgage rates to return the investment. For them, it just doesn’t pencil out.
With interest rates at historic lows and lenders competing for the same pieces of a smaller pie, it has never been more important for buyers to take a hard look at the pros and cons of the mortgage rates vs. points decision. If you are looking for a home to buy inEvansville and would like to discuss your options, give me a call. The time has never been better. You can reach me on my cell phone at 812-499-9234 or by email at Rolando@RolandoTrentini.com
Monday, February 27 2012
We have all been reading about how mortgage rates fell again in January. It seems as if half the time news like that is accompanied by some phrase like, “encouraging new buyers to dip their toes into the housing market."
Checking into it, I found that the average interest rate on conventional 30-year mortgage loans decreased eight basis points (to 4.32%) in December. That came from FHFA in their last full report. And by February 17th 2012, their site showed it was down to 3.87%. It looks like some of that toe-dipping might be about to start in earnest!
Just in case you are one of those ‘new buyers’ who might be feeling some of that ‘encouraging’, sooner or later you will learn that the government’s national rate is not the final word on everyone’s situation. It’s why I would suggest you consider making a call to one of our Evansville mortgage brokers. Here are some reasons why that’s a good idea:
A great mortgage broker can help you unearth the best mortgage; go rate shopping on your behalf. They spend their days keeping track of banks, credit unions and other sources of finance on behalf of their clients, so they are perfectly placed to access a wealth of mortgage data.
Brokers keep mortgage rates competitive by providing multiple points of view and offering alternatives when needed. Were it not for the efforts of diligent mortgage brokers, banks and financial institutions would be able to keep their rates higher. And in this climate of falling mortgage rates, they can save you a lot of the time it would take to go shopping for a great deal.
Good mortgage brokers are there to work to for you. They organize your financial picture, credit rating and future plans to come up with the mortgage that is right for you. They are motivated to work on your behalf because they know that at the end of the day it is by doing a great job for their clients that they are going to earn the reputation and word-of-mouth that keeps them in business.
If you are intrigued by the recent falling mortgage rates and are considering buying a home in the Evansville area, call me for a complimentary, no-obligation buyer’s consultation. I can introduce you to a great mortgage broker -- and we can help you to get prequalified. We can run the numbers that will help you decide if now might indeed be the right time for you to get into this market! You can reach me on my cell phone 812-499-9234 or by email at Rolando@RolandoTrentini.com
Monday, January 02 2012
Just in time for the holidays: Mortgage rates reached new all-time lows this week, pushing home buyer affordability even higher, Freddie Mac reports in its weekly mortgage market survey.
"Rates on 30-year fixed mortgages have been at or below 4 percent for the last eight weeks and now are almost 0.9 percentage points below where they were at the beginning of the year, which means that today's home buyers are paying over $1,200 less per year on a $200,000 loan,” Frank Nothaft, chief economist at Freddie Mac, said in a statement. “This greater affordability helped push existing home sales higher for the second consecutive month in November to an annualized pace of 4.42 million, the most since January.”
Here’s a closer look at mortgage rates for the week ending Dec. 22:
Source: Freddie Mac
Friday, August 19 2011
More homeowners prefer to pay off their mortgages sooner as interest rates have stayed near rock-bottom and weak labor conditions have caused them to reduce their debt loads, a survey showed on Monday.
The current trend in refinancing into shorter-loan terms is a stark contrast to the one during the height of the housing boom, when families were taking out bigger mortgages against the rising values of their homes.
Of those homeowners who refinanced a 30-year fixed-rate mortgage during the second quarter, 37 percent moved into a 15-year or 20-year fixed-rate loan. This is the highest since the third quarter of 2003, mortgage finance agency Freddie Mac (FMCC.OB) said.
In the second quarter, interest on the 30-year mortgage averaged 4.65 percent, compared with a 3.84 percent average on 15-year mortgages, the company said.
"It's no wonder we continue to see strong refinance activity into fixed-rate loans," Freddie Mac Chief Economist Frank Nothaft said in a statement.
Refinancing has comprised the bulk of U.S. mortgage activity since the housing bust that led to the 2007-2009 global financial crisis.
During the second quarter, the refinance share of mortgage applications, versus the share of applications for loans to buy a home, averaged 70 percent, Freddie Mac said.
Thursday, February 03 2011
Interest rates on home loans may drop further thanks to recent speculation that the Federal Reserve Board will inject about $600 billion into the consumer credit industry, according to a report in the Washington Post. Fed Chairman Ben Bernanke recently said this move could create mortgage rates that "will make housing more affordable and allow more homeowners to refinance."
However, other financial experts are careful to point out that this decline may not be as steep as some might expect, the report said. Amy Crews Cutts, deputy chief economist at Freddie Mac, said rates shouldn't be affected by the cash injection too greatly, noting, "Four and an eighth is far more likely than 4 percent."
The reason for this, Cutts told the newspaper, is that the Fed would be purchasing Treasury bonds rather than mortgage-backed securities. However, another dip in home loan rates would likely spur even greater levels of refinance, which already make up about 80 percent of the mortgage market.
Meanwhile, the low mortgage rates haven't helped to boost sales of existing homes. In fact, the most recent statistics from the National Association of Realtors showed that this type of purchase declined more than 25 percent in the third quarter.
Sunday, August 08 2010
Freddie Mac reports that long-term mortgage rates moved south again this week.
Interest on 30-year fixed loans hit a new low of 4.49 percent, compared to 4.54 percent last week and 5.22 percent a year ago; and the 15-year mortgage landed at 3.95 percent, down from 4 percent last week and 4.63 percent a year ago.
Five-year adjustable-rate mortgages reached a new low of 3.63 percent, down from 3.76 percent last week and 4.73 percent a year ago; while one-year ARMs fell to 3.55 percent from 3.64 percent last week and 4.78 percent a year ago.
Saturday, June 19 2010
For the first time in more than a month, the number of mortgage applications to purchase homes rose last week.
On an adjusted basis, the Mortgage Bankers Association purchase index increased 7.3 percent compared to the previous week. On an unadjusted basis it was up 17.4 percent. Compared to the same week last year, applications declined 31.3 percent.
Michael Fratantoni, MBA’s vice president of research and economics, was reluctant to declare this a trend. “While it is clear that purchase applications in May dropped sharply as a result of the tax credit induced increase in applications in April, it is unclear whether we are seeing the beginnings of a rebound now,” he said.
Mortgage rates were up slightly last week:
Source: Mortgage Bankers Association 06/16/2010) http://www.realtor.org/rmodaily.nsf/pages/News2010061602?OpenDocument
Monday, May 31 2010
The near-record low mortgage rates seen during the past few weeks may not be around much longer.
Tuesday, February 16 2010
Real estate investors are coming to the same conclusion that housing activists reached at the beginning of the crisis — forgiving principal on underwater loans may be the best way to deal with the problem.
“Principal reduction is the only answer,” says Laurie Goodman, a senior managing director at mortgage-bond trader Amherst Securities Group L.P.
Some activists and investors are asking banks to consider principal reductions so that the amount borrowers owe on underwater loans can be sharply reduced. They say this offers the best incentive for borrowers to continue to make their monthly mortgage payments.
Even though principal reductions are complicated transactions for lenders, even the largest of them are beginning to accept the idea.
"Everybody's realizing there is a place for principal reductions to a much greater extent than before," says Jack Schakett, a senior Bank of America Corp. executive involved in loan workouts.
Micah Green, a partner at law firm Patton Boggs LLP, who represents some of the largest investors in mortgages, shrugs the idea that write-downs are unfair to those who continue to make their payments. "Everybody's going to have to give a little for it to work," he says.
Source: The Wall Street Journal, James R. Hagerty (02/09/2010) http://www.realtor.org/rmodaily.nsf/pages/News2010021203