Mortgage Rates Below 5%

[fisherdog19]

For those of you in ARM's, or even a higher fixed rate, it may be a great time to refinance into a fixed rate mortgage. Current rates are 5.375% for a 30 year and 4.875% for a 15 year fixed rate mortgage. Right now we're running a .5% origination fee special, and as always, if you are a FishingMN member I will pay for your appraisal on any closed loan over $125,000. Call or email me for a free quote or Good Faith Estimate, no strings attached.

[jwhjr]

Wow, I didn't realize they were heading back down so much. I got a 15 yr at 4.875% 4 years ago so I really haven't been keeping my eye on the rates, but if I hadn't I'd be looking to get in at under 5% for sure.

[Shack]

Great post!

That is a very nice offer.

Unfortunately fisherdog19 I have a very close mortgage agent. They are doing the free appraisal and dropping some of the closing cost’s. If I did not know of this person, I would be giving you call.

Right now, if you have a mortgage with an arm or a fixed rate over 6%, now (maybe be in near future) is a phenomenal time to refinance to a lower year/rated mortgage.

I have been in a refinance situation now for almost a month. I want to drop to a 20 year. I have a 6.003 right now and in the near future it will go way lower than that and cut me 6 years off of paying on my 30 year current mortgage, with the same and even lower payment. We are in waiting mode right now, because I have been told the interest rate will go even lower. I am waiting for 4 something on a 20 year fixed.

Also, we have been hearing of housing prices dropping over the nation. In MN, they have not dropped much. When I had the appraiser stop by a couple weeks ago (another friend), I was gassed at what my house was appraised at. I thought it would be much lower.

If you have thought about lowering your payment per month or dropping down to a shorter term, now is the time to start talking to these people. If you do not know of anyone in the Biz, I would contact fisherdog19. That is a very, very nice offer. A lot of companies would not go that far. Plus he is an F.M.'er, how could you get screwed.

Good luck!!!

[LMITOUT]

What is a good rule of thumb for knowing when it's the right time to refinance? I've heard people say that it has to be X% less than what you're currently financed at before it's meaningful. Also people say that you should only refinance if you're going to live in your current house for X number of years after refinancing.

Any suggestions on these benchmarks? Thanks.

[Shack]

LMITOUT,

The same person I know the mortgage situation threw, only does “arm” loans, because they have a pulse on what the rates are every day. The reason I say this is because most use an Arm Loan, when they only live in a home for 3-5 years. These people I know work in the mortgage industry and have the advantages of switching a mortgage at a moments notice with out closing cost’s or other fee’s (minus some minimal fee‘s, I think). You and I have to pay to do a change. So the situation has to be right to make this worth while. I ( I am saying I) feel now is a time to look into this. I have heard the rates could go to record, record lows this spring and summer, so if your credit is good and you can wait, you will save money.

Again, If you have a 6% or above rate or an ARM loan, and can not wait to lower your rate/payment, I would act now. If not, I think this Spring and Summer is going to be a great time to make a move. Giving away the appraisal cost’s, I think fisherdog19 would be a guy to go to.

If you want (like I did), check around and make sure a “good deal” is a good deal.

[hanson]

 Originally Posted By: shackbash

Also, we have been hearing of housing prices dropping over the nation. In MN, they have not dropped much. When I had the appraiser stop by a couple weeks ago (another friend), I was gassed at what my house was appraised at. I thought it would be much lower.

They have not dropped much but this is the 1st time in the last 20 years that median home prices have dropped at all in the state of MN.

Refinance and lock in those ARMs if you can. I have a very, very bad feeling a lot of folks are, and will, be in for a rude awakening when they go to refi.

[Eckie]

 Quote:

What is a good rule of thumb for knowing when it's the right time to refinance? I've heard people say that it has to be X% less than what you're currently financed at before it's meaningful. Also people say that you should only refinance if you're going to live in your current house for X number of years after refinancing.

LMITOUT ~

Good questions. IMO, a general rule of thumb of a good time to refinance is when current interest rates are a minimum of .5% lower than your current rate. Since closing costs are usually a part of the equation, you want to minimize the time it will take to "recoup" those fees with a lower payment. As an example, if lowering your rate from 6% to 5.5% decreased your payment by $100, and the closing costs were $1000, it would take you 10 months to recoup those fees.

The answer to your next question is based off this also. By using the same example, if you're not going to be in the house for 10 months after refinancing, then it's probably not a good idea to refinance.

On a side note, many lenders cannot refinance a clients home unless there is a "benefit to the borrower" due to fair lending laws. An example of this benefit might be a minimum of '.25%' decrease in rate or a minimum of '$100' decrease in a monthly payment.

When refinancing, pay close attention to the fees a lender is charging, particularly origination fees, points, other lender fees and ask questions of whether these fees are required or optional. Origination fees and points will buy down your interest rate, but increase your closing costs. Another thing to consider when calculating "recouping" costs.

Lastly, again IMO, stay away from programs like "pay option arms", which provide several different payment options, such as a 'minimum payment' (which is less than the monthly interest). These programs are typically known as negative amortization loans, and are usually associated with pre-payment penalties. These programs have a direct correlation to the recent increase in foreclosures.

[MuskieJunkie]

Housing prices in the metro area are up and down depending on the specific area. When comparing the average of every sale price in 2006 to that of 2007 the twin cities as a whole is DOWN 1.3%

The worst area is probably North Mpls DOWN 33%, SW Mpls is UP 5.3%. These stats all come from the recent report released from the Minneapolis Area Association of Realtors.

[LMITOUT]

Thanks Eckie and Happy Birthday too!

I couldn't recall what my interest rate is so I dug out my paperwork and found it to be 7.25%! Time to start calling around...

[Eckie]

Thanks, Dan!

If you're above 7%, now's a great time to start checking around. Cutting 1% to 1.5% off your rate will allow you to recoup any costs in no time.

[Shack]

Ya, happy B-day Eckie.

You explained it better than I could.

Limit,

Ya, @ 7.25%, you are leaving money on the table. I am at a 6.003% and I have been waiting to make the refi more feasible and to save money in the end.

Best thing is go in and sit down with a mortgage officer and see what they have to say. I hit my bank, another mortgage company and my friend, before I made my mind up on whom to go with.

Good luck.

[MIKE IN lINO III]

I'm having a problem wrapping my arms around the hole refi situation.

I currently have 5.25 % on a 15 year mortage with 8 years left to pay.

Here's the problem I'm having....... IF I had a higher interest rate say 7% why would I refi to 5% and start paying all of that interest up front again. There must be a break even point where you just suck up the rate because it wouldn't make sense to start over.

Am I missing something???

Mike

[Eckie]

Mike,

You bring up a good point. In the example you used, one may consider refinancing to say, a 10 year loan at 5% vs. "starting over" on another 15 year mortgage provided the payment made sense (you'd only be backtracking a year or two). I agree, it wouldn't make sense to save on the monthly payment, only to backtrack and gain 7 more years of payments. Obviously, if I were you, I would not consider any refi options.

The main reasons people refinance is 1) cash flow, 2) decrease the life of the loan and 3) change the term (ARM to a Fixed product).

Here's another example -- say you're at 7% on a 15 year with 8 years left. You're strapped for cash, making a high payment and plan on moving in 3-4 years. An option here might be switching to a 30 year mtg at 5.5%, thus taking advantage of a lower rate and a much lower payment, knowing the home won't be paid off even with the existing 15 year note you have. This way, you save as much as possible for the next couple of years before you sell and move. When you do sell, you still have the equity in the home.

[BoxMN]

Remember, you can always make higher payments than just the payment you HAVE to. I.e. if you are at 7% with 8 years left, and you refinance at 15 years with 4.5%. Your payment you need to make will certainly go down, giving you more cashflow. But you can also pay the same amount you are accustomed to, essentially doing double or triple payments (looking at principal, not total payment) and still only paying the same that you were before per month.

Then, say you got sick, laid off, etc., you can then back down and only pay the "new" monthly payment which will bemuch less, but yes you are going to pay longer, thus more interest in the long run.

I am no refi guy, so there may be a reason this doesn't make sense for some, but you can look at any loan this way. You don't get penalized for paying more than you need to, and with a less interest rate, more is going towards principal with the same amount of payment.

[Black_Bay]

Stupid question here but is it possible to refinance a home equity loan?

[Eckie]

Yes!

There are two types of equity products -- loans and lines of credit.

Lines of credit are variable and adjust with Prime (currently at 7.25%)

Equity loans are fixed (usually at a higher rate than a line would offer), but can be refinanced and the costs to do this are significantly less than refinancing a 1st mortgage.

[DEADhead]

thanks for all of the great information posted here!

[Eckie]

JP ~

Happy to help..hope the info is helpful.

(btw - nice bio up in the women's thread..your daughter is adorable).

[Powerstroke]

SO much of this is greek to me so I'm trying to take it all in. Fees and "points".......WHat are points and why are they significant?

[fisherdog19]

The bottom line is that everyones sitution is different, so to give one answer for all would be foolish. If you are currently at 6.5% and I can get you to 5.5% but you only have a $50,000 mortgage, it may not be worth it to refi. A new conforming guideline has come into play, where it didn't in the past. If your credit score is less than 680, you will be dinged on the rate where in the past, if you had a 590 or an 800 and got approved, your rate was the same. A general rule of thumb is that if you cover your closing costs (not settlement charges) in 48 months, there is a net tangible benefit to the refinance. Of course if you are fixing an arm, that is benefit enough, even if your payments go up slightly. We like to see at least a .75% decrease in rate unles you have a large mortgage, say $250K or more where even .5% will decrease your payments some.

Eckie has brought up some good points, but the only way to tell if a refinance would make sense would be to have someone run the numbers. This doesn't mean you need your credit pulled and all that, just some basic information will tell a lot. I can usually tell within 3 minutes, and a few questions if it will be worth it to the client. I would love to refinance everyone, but if it is of no benefit to the borrower, I will not do it.

One thing to keep in mind is that I am not a broker, but do business in conjuction with and am a division of a Federal Savings bank. I run my business my way, seperately from the bank, but fund all my loans with the bank and I am subject to all the stringent federal lending laws in which we have a minimum of 2 files per month audited. I do have the ability to broker a loan out if needed, but still follow the same strict laws. This is why I can still offer many programs that brokers cannot in the state of MN, and can fund loans in all fifty states as my Federal Charter supercedes all state licenses and regulations because the federal laws I have to abide by are much stricter.

Shackbash, if you plan on refinancing, I would do it now. The person you know in the industry does not have a crystal ball and for them to say rates will go lower than the 5.25% 30 year fixed rate I locked 2 clients in on Tuesday, is foolish.

Powerstroke, points are sometimes used to buy a rate down. This means that if you want a rate that will cost the lender money to get, they will charge you the cost to buy down the rate.

Limitout, if you are above 7%, you definately need to look at refinancing. You may be able to drop your rate 1.5% and decrease your term at the same time, while still keeping your payments close to what they are. Or you could just increase your cash flow with a lower monthly payment. I would be more than happy to shoot you a GFE.

Whatever your situation, give me a call or shoot me an email and I will answer any questions you may have and help you to the best of my ability. I have worked with quite a few FM'ers, and it's been a pleasure working with each one of them.

[Shack]

Fisherdog,

No one has a crystal ball, but I sure am glad I did not lock into anything a month or so ago when I started this. Things have dropped big time since. I Have heard these type of things about interest rates in literature and news shows I have been watching. I was not told this by a lender/mortgage agent. I also stated the time is now to start talking with you guys, so you do not loose out. I am talking and about to pull the trigger. My comments where to those that are in a very good mortgage situation right now and in the near future things could get much, much better or not.

Our economy is in the dumps right. If there was a bet going in Vegas about where or not the Fed. will drop the interest rate to unheard of record lows in the next 6 months to save our economy from going deeper into a recession or even a depression, I would be throwing a $1000 to the bet. 2-4 months our economy could recoup its self and then the Fed. would raise rates to avoid others things from happening to inflation and such. That is when the barrower would have a less of a chance at things being right for him to even consider a mortgage move (unless with an arm).

I have stated it many time now, but now is a great time to talk with these people at mortgage companies. I would not take anything I am hearing second hand on the internet to hart to much (my post’s included).

My view on how the intrest could go is just a prediction and should only be taken as such.

[LMITOUT]

Indications right now are that the Feds will drop the prime again at the end of the month. How far it will drop is anyone's guess, but they need to do something to spur the consumers to keep buying. The problem is that it's all on credit and that isn't good for the country either.

[Borch]

We refinanced 5 years ago. We went from 22 years left on a 30 mortgage at 7.5% fixed to a 15 year mortgage at 5.25% fixed and got an additional 20,000 for some home improvements. Now we're at a point where we'll be riding it out unless we end up making a move prior to to loan being paid off.

Shop around regarding the closing costs as well. It can vary greatly from one provider to another.

I'm very weary of all the additional mortgages especially in this market. Right now it appears the prices on homes have not gone down that much due to the fact that manay of the folks who are trying to sell the homes have too much money invested in them to drop the price further. It's a bad situation when you owe more on your home than it is actually worth.

[fisherdog19]

Shack, nothing taken to heart, I just don't want you to wait for further dropping rates and get stuck with something higher. I tend to be a little conservative, and don't want to lose a low rate but I always leave the final decision to the borrower. I will give clients industry news, and educate them about what is going on in the market, but if they ask for my opinion on if they should wait, I rarely give it. Like I stated in an earlier post, no one has a crystal ball so I don't make recommendations on whether or not a client should wait as I don't want to put my foot in my mouth . In my professional opinion, we saw the bottom this past Tuesday where the 30 year was at 5.25% and the 15 year was at 4.875%.

One thing you all have to keep in mind is that the Prime rate, in which there has been so much news about it being dropped lately, has NOTHING to do with mortgage rates. The mortgage rates mirror the 10 year bond; the only mortgage product that is affected by the Prime rate is the home equity line of credit (HELOC), which is usually a second lien.

I hope I've helped some of you make decisions, and I've had quite a few inquiries already. Again, if you ever have a question about anything, don't hesitate to contact me. I also have many other products to offer such as construction, no closing cost home equity products, commercial, and lot loans in addition to the cookie cutter purchase and refinance loans. I will soon be an FHA and VA approved lender as well for those of you who may qualify for those products. Once we become approved, I will post about the programs and benefits offered in the FHA and VA products.

Have a great weekend, and good catching

[Shack]

Some more very good advice.

Thanks for staring this post. Nothing was taken on my side, just clarified my "prediction". I would act now, if you are in the market.

[cliffy]

Fisherdog:

Any changes in the rates with the move the feds made today?

Cliffy