5-Year ARM Falls To Historic Lows

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Posted on 1st July 2011 by Anthony in Mortgage Rates

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30-year fixed vs 5-year ARM

The interest rate differential between fixed-rate and adjustable-rate mortgages continues to widen and has now reached historic levels.

There’s never been a better time to lock an ARM.

According to Freddie Mac’s weekly Primary Mortgage Market Survey, homeowners in Casa Grande who lock their mortgage rate today will save 129 basis points on rate, on average, by choosing a 5-year ARM as their mortgage product as compared to a 30-year fixed rate loan.

The average 30-year fixed rate is 4.51%. The average 5-year ARM rate is 3.22%.

It’s the biggest interest rate spread between fixed-rate and adjustable-rate mortgage rates in Freddie Mac’s recorded history; a gap which is the result, in part, of the 5-year ARM dropping to all-time lows this week.

Rates for the 5-year ARM are even lower than during last year’s historic Refi Boom.

Putting today’s “spread” in action against a hypothetical $250,000 loan size, a homeowner that chooses an ARM over a fixed-rate loan would save $184.30 monthly, and would have $500 fewer closing costs.

That’s a 5-year savings of $11,558 — nearly triple what you would have saved just 2 years ago.

The main reason why today’s adjustable-rate mortgages are priced so aggressively relative to comparable fixed-rate loans is that Wall Street expects the economy to drag for the next several quarters, after which it expects an acceleration.

ARMs tend to reflect short-term expectations for the U.S. economy which is why short-term mortgage rates are dropping.  Fixed products, by contrast, take a longer view and expectations for an economic rebound are pulling fixed-rate mortgage rates up.

For now, mortgage applicants can exploit the difference — especially those who plan to move within the next 5 years — but adjustable-rate mortgages aren’t right for everyone. ARMs carry particular risks about which you should be aware before locking.

Before you choose an ARM, therefore, talk it through with your loan officer.

Arizona real estate / 15-Year Fixed Rate Mortgages Look Cheap / Maricopa real estate

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Posted on 25th March 2011 by Anthony in Mortgage Rates

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Comparing 30-year fixed to 15-year fixed (2006-2011)

It’s a great time for MAricopa home buyers and homeowners to look at the 15-year fixed rate mortgage.  Arizona mortgages look cheap, and that makes it a double wammy for Arizona real estate and Maricopa real estate.

According to Freddie Mac’s weekly Primary Mortgage Market Survey, the relative “discount” of a 15-year fixed rate loan as compared to a comparable 30-year product is the largest in recorded history. The interest rate spread between the two benchmark products is now 0.77%, nearly double the recent, 5-year average of 0.44%.

Despite its lower rates, however, homeowners that opt for a 15-year fixed mortgage should be prepared for higher monthly payments. This is because the principal balance of a 15-year fixed is repaid in half as many years as with a 30-year amortizing product.

The payment increase is 41% higher at today’s rates. If you can manage that, though, you’ll reap dramatic interest payments savings over time. For each $100,000 borrowed at today’s market interest rates, your mortgage interest costs on a conforming 15-year term mortgage will be lower by $56,000 versus an identically-structured 30-year term. The more you borrow, the more you save.

That said, not everyone should use the 15-year product.

One reason you may want to avoid 15-year products is because the higher payments may lead to financial stress. Unless your monthly income far exceeds your monthly debts, choosing a 30-year product may feel safer for you.

Another reason is that, with less mortgage interest paid, 15-year mortgages don’t allow for as many mortgage interest tax deductions. This can have tax implications to you each year. Or, maybe you prefer to have your home leveraged, investing “spare dollars” in stocks and bonds.

These are all legitimate cases to stick with a 30-year term, but if you’ve ever explored the idea of using a 15-year fixed rate mortgage for your home, today, the math is in your favor. Talk to your loan officer before the rates start rising.  If you are looking for Arizona real estate or Maricopa real estate visit www.pru1re.com for all of your Arizona real estate information.  If you need an Arizona mortgage click here.

Arizona Mortgage Rates / Casa Grande Real Estate

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Posted on 11th February 2011 by Anthony in Mortgage Rates

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Mortgage rates (Feb 2010 - Feb 2011)

Arizona Mortgage rates are rising.

Over the last 7 days, conventional, 30-year fixed rate mortgage rates have jumped 24 basis points, or 0.24%, according to Freddie Mac’s weekly Primary Mortgage Market Survey.  This is a significat increase, however it is only a small part of the equation when talking about Casa Grande real estate.  With affordable housing, and still affordable Arizona mortgage rates, the total proposition to buy a home is still a good one.

It’s the largest 1-week spike in mortgage rates in recent history.

The 30-year fixed rate mortgage now averages 5.05% nationally. This is much, much higher than what we saw last November when mortgage rates were 4.17% and looked headed to the 3s.

That’s not the case today. In fact, it’s the opposite. 

Arizona Mortgage rates have risen quickly and fiercely this year. As of this morning, mortgage rates are higher over 9 consecutive days, marking the longest mortgage rate losing streak in the last 6 years, at least.

Note, however, that when you call your loan officer or bank, you may not be quoted the same 5.05% rate as shown by Freddie Mac. This is because Freddie Mac-reported rates are national averages. Any given mortgage rate may be higher or lower depending on its region. 

As an illustration, look how this week’s rates breaks down by area:

  • Northeast : 5.07 with 0.7 points
  • Southeast : 4.99 with 0.9 points
  • North Central : 5.09 with 0.6 points
  • Southwest : 5.06 with 0.6 points
  • West : 5.02 with 0.8 points

In other words, the rate-and-fee combination you’d be offered in your home town of Maricopa is different from what you’d be offered if you lived somewhere else. In the Southeast, rates tend to be low and fees tend to be high; in the North Central U.S., it’s the opposite.

The good news is that, as a mortgage applicant, you can have your pricing whichever way you prefer. If getting the absolute lowest mortgage rate is what’s most important to you, have your loan officer structure your loan as in the “Southeast Style”. Or, if you prefer to have as few closing costs as possible and don’t mind slightly higher rates, ask for that type of set-up instead.

Either way, consider locking your rate as soon as possible. If rates keep rising, it won’t be long before they touch 6 percent. For more information about Casa Grande real estate, or homes for sale in Casa Grande Arizona visit www.pru1re.com. For more Arizona mortgage information click here.

Arizona Mortgage Rates Rise again / Casa Grande Real Estate

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Posted on 9th February 2011 by Anthony in Mortgage Rates

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Arizona Mortgage rates risingMortgage rates worsened for the 7th straight day Tuesday.  A long stretch in this economy.  rates are still much lowere than they have been historically, and coupled with the prices of Casa Grande real estate, it still remains a great buy.

Conventional, 30-year fixed mortgage rates are now around 5-51/2  percent, with FHA mortgage rates running roughly the same.

This is a huge increase from just 11 weeks ago when mortgage rates were riding an 8-month-long hot streak, and appeared headed into the 3s. Then the Federal Reserve intervened.

On November 3, as additional support for markets, the Fed announced its second round of bond buys, a $600 billion program dubbed QEII — short for Quantitative Easing, Round II. Wall Street got spooked on the news; investors feared runaway inflation.

That’s when lower rates slowed down. Here’s why:

(A) Inflation makes the U.S. dollar lose its value,

And, (B) U.S. mortgage bond payments are paid in U.S. dollars.

Therefore, (C) Inflation makes mortgage bond repayments lose their value.

When mortgage bond repayments are worth less, bond demand falls among the global investor set and that causes bond prices to fall along with it. When bond prices fall, mortgage rates rise and that’s exactly what we’re seeing right now.

Since the Fed’s QEII announcement, Arizona mortgage rates have rised, but Casa Grande real estate is still affordable.

Given recent trends, it’s probably safe to declare the Refi Boom “officially over” and the era of low mortgage rates may be over, too.  Home prices may move up or down in Casa Grande this year, but rising Arizona mortgage rates could render the point moot. If you’re looking for a great “deal” with low, long-term payments, the time to get in contract is now.  Casa Grande real estate is a very good investment, and rates are still far under 6%. 

Because of rising rates, homeowners have lost roughly 10% of their purchasing power since November.  We do have to keep this all in perspective.  It wasn’t long ago that 8% was a great rate.  Arizona mortgage rates are relatively low for the long term, and rising for the short term.  For Casa Grande real estate information and arizona mortgage rates please visit www.pru1re.com.

Image Copyright (c) 123RF Stock Photos

Maricopa Real Estate / Maricopa Mortgages / Rates changes

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Posted on 8th February 2011 by Anthony in Company News | Mortgage Rates

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ARM adjustment rates for 2011

If your ARM is due to adjust this spring, your best move may be to allow it. Don’t rush to refinance, evaluate all of your options for your Maricopa mortgage, including staying with your adjustable rate – your rate may be adjusting lower. What to do with your financing is a key question when investing in Maricopa real estate.    The reason that they are adjusting lower?

It’s because of how adjusted mortgage rates are calculated.

First, let’s look at the lifecycle of a conventional, adjustable rate mortgage:

  1. There’s a “starter period” of several years in which the interest rate remains fixed.
  2. There’s an initial adjustment to rate after the starter period. This is called the “first adjustment”.
  3. There’s a subsequent adjustment until the loan’s term expires. The adjustment is usually annual.

The starter period will vary from 1 to 10 years, but once that timeframe ends, and the first adjustment occurs, conventional ARMs enter a lifecycle phase that is common among all ARMs — regular rate adjustments based on some pre-set formula until the loan is paid in full, and retired.  These can be very beneficial for certain types of buyers of Maricopa real estate.  They can also be very hurtful if not used properly.  When applying for Maricopa mortgages be aware of what your goals are.

For conventional ARMs adjusting in 2011, that formula is most commonly defined as:

(12-Month LIBOR) + (2.250 Percent) = (Adjusted Mortgage Rate)

LIBOR is an acronym for London Interbank Offered Rate. It’s the rate at which banks borrow money from each other. It’s also the variable portion of the adjustable mortgage rate equation. The corresponding constant is typically 2.25%.

Since March 2010, LIBOR has been low and, as a result, adjusting mortgage rates have been low, too.

In 2009, 5-year ARMs adjusted to 6 percent or higher. Today, they’re adjusting near 3.000 percent.

That’s a big shift. 

Therefore, strictly based on mathematics, letting your ARM adjust this year could be smarter than refinancing it. You may get yourself a lower rate.

Either way, talk to your loan officer. With mortgage rates still near historical lows, Maricopa homeowners have interesting options. Just don’t wait too long. LIBOR — and mortgage rates in general — are known to change quickly.  If you are looking into Maricopa real estate, or shopping to apply for a Maricopa mortgage, contact Prudential One Realty at 520-836-1001, or visit www.pru1re.com .  We look forward to serving your real estate and mortgage needs.

Arizona real estate /Loan Costs Increasing April 1/Casa Grande, Maricopa, Phoenix

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Posted on 6th January 2011 by Anthony in Industry News | Mortgage Rates

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Arizona real estate news: LLPA rising April 1 2011Starting April 1, 2011, loan-level pricing adjustments are increasing. Most conforming mortgage applicants will face higher loan costs.  This means its time to check your loans Arizona home owners.  Alot of home owners, in places like Maricopa, Casa grande, and Phoenix Arizona, have loans that are getting ready to adjust, it is imperative to check this out and see if it is in your interests to look at a new loan program for your real estate purchase

Loan-level pricing adjustments are mandatory closing costs. They’re assigned by Fannie Mae and Freddie Mac, and based on a loan’s specific risk to Wall Street investors.

First constructed in April 2009, loan-level pricing adjustment are a means to help Fannie Mae and Freddie Mac compensate for “riskier loans” by bolstering their respective balance sheets.

Since the initial roll-out, Fannie and Freddie have amended adjustments five times. The pending April adjustment will be the 6th revision in two years.

No class of conforming borrower is exempt from LLPAs. Each loan delivered to Fannie Mae is subject to a quarter-percent “Adverse Market Delivery Charge”. That cost is often absorbed by the lender.

The remaining adjustments are grouped by category:

  1. Credit Score : Lower FICO scores carry bigger adjustments
  2. Property Type : Multi-unit homes carry bigger adjustments
  3. Occupancy : Investment properties carry bigger adjustments
  4. Structure : Loans with subordinate financing may carry bigger adjustments
  5. Equity : Loans will less than 25% equity carry bigger adjustments

LLPAs are cumulative. A borrower that triggers 4 different categories of risk must pay the costs associated with all four traits.

Loan-level pricing adjustments can be expensive — as much as 3 percent of your loan size in dollar terms.  As an applicant, you can opt to pay these costs as a one-time cash payment at closing, or you can to pay them over time in the form of a higher mortgage rate. 

The loan-level pricing adjustment schedule is public. You can research your personal scenario at the Fannie Mae website. However, you may find the charts confusing. Especially with respect to which route makes the most sense for you — paying the adjustments as cash, or paying them “in your mortgage rate”.

Phone or email your loan officer for help. Prudential One Realty serves the real estate market for Phoenix Arizona, Maricopa, and Casa Grande Arizona.  For more real estate information please visit www.pru1re.com.