jIMOh
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Watch the 10 year treasury- that signals where mortgage rates will go. And right now that market is driving mortgage rates UP.
Mortgage rates headed down - time to refi?
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Watch the 10 year treasury- that signals where mortgage rates will go. And right now that market is driving mortgage rates UP.
The mortgage market is falling apart, firms do not want mortgages on their books, no matter the quality. The rates went up 0.6% yesterday, according to a guy on Kudlow (it might have been Bloomberg) last night.
I'm sure Bernacke will "Shock and Awe" us again soon. I thought it was a mistake when he panicked and caused the last big stock (temporary) market rally. That mistake has been confirmed. The Fed needs to let markets set prices and not interfere. Free market capitalism. Keep your nose out of it Benacke, it's not your job to support free market prices. Supply the liquidity, keep inflation low, that's it, I'm sure he's listening.
brewer12345
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Illiquidity in the markets have caused spreads for mortgage backed bonds to widen out hugely even as treasury rates have fallen. This is feeding back into the rates charged on mortgages, shoving rates up a lot. IMO, the Fed cannot allow a problem in the market for Freddie, Fannie and Ginnie MBS to persist for any length of time without imperiling the entire financial system, so I think y ou will see more and bigger responses like the expanded TAF and weekly 28 day repos announced this morning.
Just be patient and mortgage rates will eventually come in. But the volatility we have seen in these rates means you should be ready to jump when the window opens.
I suspect I will be sitting on my existing 15 year mortgage (10 years left) for the duration.
Just be patient and mortgage rates will eventually come in. But the volatility we have seen in these rates means you should be ready to jump when the window opens.
I suspect I will be sitting on my existing 15 year mortgage (10 years left) for the duration.
ziggy29
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Isn't that the truth. One of my short-term investment grade bond funds was down almost 1% yesterday even as Treasuries rallied. This one has about 30% of its portfolio in CMOs, which I have to think was the cause. Many of these are government-backed, so if people would stop panicking they'll be fine. Instead, they're selling low.
Yeah, I have been watching the 10yr closely, and it's been falling recently. Not as low as it was in late Jan but still should drive lower rates than what we've seen.
Brewer's answer seems to explain what is going on (thanks!)....guess I'll just keep a watchful eye and/or reset the PenFed auto-alert to make sure I don't miss the next window.
Patrick
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But in order for someone to sell low, someone else has to buy low, no?
megacorp-firee
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Yes ... usually the market makers
Penfed has the 5/5 listed at 5.125 this morning. This seems like a pretty good rate. This would be a decent deal for me, but not a great one like when they dipped below 4.75 and I hesitated
If anyone is in the advice giving mood I'm all ears. I turn 31 this year and currently have 28 years left on a 30 year fixed rate at 6.35%. I have > 20% equity in my house. I would put the odds of me being in this house in 5 years at < 10% though there is a chance that I will want to rent it out at that point instead of selling... maybe 30-40% chance.
Nick
If anyone is in the advice giving mood I'm all ears. I turn 31 this year and currently have 28 years left on a 30 year fixed rate at 6.35%. I have > 20% equity in my house. I would put the odds of me being in this house in 5 years at < 10% though there is a chance that I will want to rent it out at that point instead of selling... maybe 30-40% chance.
Nick
brewer12345
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If you can whack more than 1% off your loan rate, it seems attractive to me, so long as you would be OK with the loan resetting to the max it can contractually go in 5 years' time.
Having said that, I would not be surprised in the slightest to see mortgage rates come down shortly. They have diverged from treasuries lately as the mortgage bond market has fallen apart, but the Fed's efforts are starting to take effect and agency mortgage bonds are starting to narrow the gap with treasuries.
Having said that, I would not be surprised in the slightest to see mortgage rates come down shortly. They have diverged from treasuries lately as the mortgage bond market has fallen apart, but the Fed's efforts are starting to take effect and agency mortgage bonds are starting to narrow the gap with treasuries.
Our personal preference (wife and mine) has always been to have a fixed rate mortgage. What is the difference between your current fixed rate, and another fixed rate (say 20 year note)?Penfed has the 5/5 listed at 5.125 this morning. This seems like a pretty good rate. This would be a decent deal for me, but not a great one like when they dipped below 4.75 and I hesitated
If anyone is in the advice giving mood I'm all ears. I turn 31 this year and currently have 28 years left on a 30 year fixed rate at 6.35%. I have > 20% equity in my house. I would put the odds of me being in this house in 5 years at < 10% though there is a chance that I will want to rent it out at that point instead of selling... maybe 30-40% chance.
Nick
Obviously, one would also have to assess if the shorter term mortgage is capable of being paid also.
Are you 100% sure you have > 20% LTV on your current mortgage? Home prices have even started going down in our area (NorthEast). Slightly, but they have nonetheless.
Likewise, if there's a fairly high chance you'd want to rent it out, why worry about switching the mortgage to an adjustable rate in the first place. I wouldn't have an ARM if I were even considering renting a house out, because I'm more risk averse than that.
Oh, and don't be afraid to pull the rip cord if it hits a rate that you're comfortable with.
If you were waiting for rates to drop by 1/2 or more, that's one thing. But to worry about 1/8 to < 1/2, is a waste of time. You might as well try and time the market.
If you were waiting for rates to drop by 1/2 or more, that's one thing. But to worry about 1/8 to < 1/2, is a waste of time. You might as well try and time the market.
I'm not sure exactly how homes are appraised, but from what I can tell the values have continued to rise in my neighborhood. Price per square foot is about 10-15$ more for recent sales than what I paid for my home and I have the addition of a 2 car garage where most of the homes have no garage (older neighborhood) so I would think that would be worth something, maybe not though.
The 30 year fixed at penfed is 6.125%. I'm pretty risk tolerant, but I don't necessarily see the 5/5 ARM as that much of a risk... worst case is that the loan adjusts up 2% (max) after 5 years and stays there for another 5. Using simple math, this would give a 10 year interest rate of (5.125 + 7.125) / 2 or 6.125... so after 10 years, there is no real risk. If it went up another 2% after that we would have (5.125 + 7.125 + 9.125) / 3 = 7.125 for 15 years. This doesn't really seem highly risky to me... and this is simple math assuming the worst case. I would expect the actual effective rate to be lower than the simplified version because the loan value will be less as time goes on, and more principal will be paid down during the first 5 years with the lower rate. I may be missing something though
I'm really looking for 4.75 or so to push me over the edge. If it gets much closer to that my trigger finger will be very itchy.
Hope you're right....DW and I are still patiently waiting the 5.0% or less 15yr fixed. Over the past couple weeks watching the 10yr treasuries be as low (for longer) than the January dip has been frustrating.
True, more of the principle would be paid down in the first 5 years.I'm not sure exactly how homes are appraised, but from what I can tell the values have continued to rise in my neighborhood. Price per square foot is about 10-15$ more for recent sales than what I paid for my home and I have the addition of a 2 car garage where most of the homes have no garage (older neighborhood) so I would think that would be worth something, maybe not though.
The 30 year fixed at penfed is 6.125%. I'm pretty risk tolerant, but I don't necessarily see the 5/5 ARM as that much of a risk... worst case is that the loan adjusts up 2% (max) after 5 years and stays there for another 5. Using simple math, this would give a 10 year interest rate of (5.125 + 7.125) / 2 or 6.125... so after 10 years, there is no real risk. If it went up another 2% after that we would have (5.125 + 7.125 + 9.125) / 3 = 7.125 for 15 years. This doesn't really seem highly risky to me... and this is simple math assuming the worst case. I would expect the actual effective rate to be lower than the simplified version because the loan value will be less as time goes on, and more principal will be paid down during the first 5 years with the lower rate. I may be missing something though
I'm really looking for 4.75 or so to push me over the edge. If it gets much closer to that my trigger finger will be very itchy.
Let's examine a $100,000 mortgage @ 6.125% and @ 4.75%, for years 1-5.
6.125% principle paid down = $6,803.
4.75% principle paid down = $8,502.
Is it worth waiting to paying down less than $340/yr (average) on the principle for the first 5 years?
That's why I was suggesting a shorter term mortgage. The mortgage would be inherently paid down sooner, although one could typically pay it down sooner by making extra payments in either case.
And, one has to figure how the rate will adjust at a maximum of up by 2% at the end of the 5 years (unless that was of course in writing). Most of the ARMs that I had seen so far allow for a maximum adjustment up to 12%-13% for the life of the loan. That would truly hold me back from getting that kind of mortgage. But as you mentioned, you're more risk tolerant than I.
Here are the terms:
- Adjustable Rate Mortgage with a low rate that only adjusts every 5 years for 30 years
- Rate would adjust up to 2% or our prevailing rate, whichever is the lowest
- Maximum lifetime adjustment that will not exceed 5% above the initial rate
JPatrick
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Of course we are just hours from a fed rate cut and perhaps getting a glance at what to expect in the future (rate wise.)
Mortgage rates are not behaving as they historically have so it is hard to say what may happen, but with the goal being to bring those rates down, I would not bet against it happening. That said, today's rates look awfully good when viewed with a 30-40 year perspective.
Myself, I'm hoping to lock a HEL under 4.8% over the next few months.
Mortgage rates are not behaving as they historically have so it is hard to say what may happen, but with the goal being to bring those rates down, I would not bet against it happening. That said, today's rates look awfully good when viewed with a 30-40 year perspective.
Myself, I'm hoping to lock a HEL under 4.8% over the next few months.
In general, those are pretty darn good terms. Although after the 15th year, the rate could be at 11.125%.
And, worst case scenario, after year 5, your payment increases by about $155/month (in comparison to original payment), after year 10 the payment increases by another $138/month (or $293 more than the initial monthly payment), and after year 15 the payment increases by another $54/month (or $347 more than the original payment). In essence, you've added about 50% more payment to your mortgage in just 15 years.
Obviously, if you can rent it out for more than that every month for the full term, then you are a benefactor of appreciation.
(I know the numbers are off a little bit, I'm just to lazy to do them thoroughly)
Actually it would max out at 10.125 if I got it today at 5.125 with a max increase of 5% over the term.... and wouldn't the value of the dollar be nearly halved by 2023? Haha... there are just a lot of factors to take into account. For the next 5 years, I don't think there is any doubt that it's a good deal and it's not a bad deal at all for the next 10. After that the future is muddier.
Haha... there are just a lot of factors to take into account. For the next 5 years, I don't think there is any doubt that it's a good deal and it's not a bad deal at all for the next 10. After that the future is muddier.JustCurious
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Yep, I do that all the time.It's principal, not principle.
Argue with myself ... it's 'al', no it's 'le'.
HFWR
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In my experience, the principal is the guy with the paddle... 
W2R
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In my experience, the principal is the guy with the paddle...
The princiPAL is your PAL. Remember that one?
brewer12345
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Not sure if I quite have the brass cojones to do this, but a thought has crossed my mind: with the Fed whacking rates to beat the band and not about to reverse course any time soon, why not refi the mortgage onto a HELOC? Schwab offers a 70% LTV HELOC at prime minus 1%, which would be 5% right now (less if the Fed does what everyone seems to be expecting).
ziggy29
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He wasn't my pal, especially when I was in the 6th grade. I was one of those bored kids who wasn't stimulated by the work at that level and wound up distracting the class -- and being sent to Mr. Schadeck's office frequently. The school secretary (this was 1977, they were still secretaries then) was one of the meanest people I've ever known.The princiPAL is your PAL. Remember that one?
REWahoo
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I remember that I didn't really mind going to school, it was just the principle of the thing...or was it the principal?
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