Hi Guys,
I’m trying to refinance my second house and have been watching the rates for 30 year fixed, dropped 10 weeks in a row. Got a call today saying the loan will not go through because they believe the value is in the land, house is worthless,not that he actually said that. Mind you, this was a 65% loan to value per my recent appraisal.
I was thinking of letting the whole thing drop and start over late summer or early fall because of all I’ve read on rates dropping to around 4 to 4.5% so I was not all that upset with the news.
Now I know there are a great many of you here that are more savvy with regard to rates and the effects the fed, new president, etc., will have on rates 6 months down the road. Given that there is no crystal ball, what do you see happening, rates continue to go down, stay flat, or actually increase.
Thanks
Kevin
Replies
I think it's anybody's guess. Right now the banks don't want to lend mostly because they don't want to tie up money long-term when they don't know which way rates are headed.
I'd suggest trying a different bank, though. A lot depends on what condition the bank is in.
I'm not a finance pro, but here's what I think might happen:
Foreign governments are not likely to buy treasuries (lend $ to the US) for cheap any more. This will drive rates up in the US. Also, some economists think the infusion of money might be inflationary down the road. The fed will be forced to raise rates if this happens. You are my age, so I know you remember the late 70's; around 14% inflation drove 21% interest rates.
So, if it were me, I'd give myself a few months of shopping around, but I wouldn't wait longer than that. And I definitely would get a fixed rate.
And keep in mind that the banks will be more inclined to lend for a shorter term.
The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. -John Kenneth Galbraith
A friend of mine, long term mortgage broker and S&L officer, says he is very unsure of rates continuing to drop. FWIW
I went ahead and committed to a refi at 4.875% (from previous 7%). It may go down yet, but I decided to play it safe and take this weeks offering. How much more can it go down, anyway?
If it drops to below 4%, I'll refi again! <G>
I've got to up the value of the house, new paint job, new roof, etc. Things i thought I'd do over time, all in an effort to get the low rate without any glitches in the process.
Good Idea with sprucing it up a little. It's crazy but if you get an appraiser in a bad mood, it makes a difference. Make sure you go directly to the lender and skip the broker. Many big banks (Bank of America, Wachovia, etc) are the ones with the most resources, and will not charge such outlandish points. Remember, a broker needs to make money and does it by charging points or inflating the interest rate a point or so. Also, be careful with how many applications you submit, as it could be detrimental to your credit.<!----><!----><!---->
IMO, Interest rates are going to be a moot topic for a little while. Until the banks and investors get a feel for Obama, and his stimulus plan, and where it's going, things are likely to slow going for a month or two. What Obama needs to do is revise the TARP and make banks lend to people with less than perfect to good credit. <!----><!---->
The fed is falsely holding down rates. They'll have to come up soon. Buy while you can.
Family.....They're always there when they need you.
Is the bank in question local or nation wide? If not a local bank, give them a try. The local ones weren't caught up in all the subprime scandal, and still have the resources for mortgage loans, at least from what I've seen. And they usually can beat the rates and fees charged by the big boys. Credit Unions are another good source.
IMO and from a few people that are in the know, 2nd or 3rd quarter of this year will be when the rates finally bottom. How much more of a drop is anybodys guess.
The liberty of discussion is the great safeguard of all other liberties. --Macaulay.
and definitely find another appraiser. The local banks are a good source for referrals.
The liberty of discussion is the great safeguard of all other liberties. --Macaulay.
Thanks for the info. I'll be painting it in a few months, and a few other things, and start the process again.
We're thinking of a refi right now. We talked to our local bank, who has our mortgage, two weeks ago. 15yr fixed was 4.3%. Talked again on Friday, it's up to 4.7%... dang!http://www.tvwsolar.com
I went down to the lobby
To make a small call out.
A pretty dancing girl was there,
And she began to shout,
"Go on back to see the gypsy.
He can move you from the rear,
Drive you from your fear,
Bring you through the mirror.
He did it in Las Vegas,
And he can do it here."
My mortgage broker was telling me that some of these SUPER good rates may only last for an hour or two before they get bought up.
Tu stultus esRebuilding my home in Cypress, CAAlso a CRX fanatic!
Look, just send me to my drawer. This whole talking-to-you thing is like double punishment.
15 yr biweekly no points no closing cost no fees 4% at my local bank. Note paid in 13 yrs.
I'm tempted but I only have 12 left on my current at 6%The liberty of discussion is the great safeguard of all other liberties. --Macaulay.
Ours doing 1 point origination, 1 point discount, $350 appraisal, $700 closing, $625 commitment fee, 255 title ins, $50 recording fee, $30 courier/email/wire, plus about 100 bucks of more piddly sheeit... comes up to about $3500 w/lawyer... still lookinghttp://www.tvwsolar.com
I went down to the lobby
To make a small call out.
A pretty dancing girl was there,
And she began to shout,
"Go on back to see the gypsy.
He can move you from the rear,
Drive you from your fear,
Bring you through the mirror.
He did it in Las Vegas,
And he can do it here."
Is this a local bank?
The no fee deal from mine has me wondering about title fees, recording and what not. Those incidental things add up quick and at 4%, is there enough profit for them to carry it.
Of course their rates for CD's money market etc reflect that kind of discount.The liberty of discussion is the great safeguard of all other liberties. --Macaulay.
BB&T, a regional bank. I'm seeing much better numbers for closing costs on line, but not for interest rates. I'm also missing how raising interest rates is going to stimulate anything helpful.http://www.tvwsolar.com
I went down to the lobby
To make a small call out.
A pretty dancing girl was there,
And she began to shout,
"Go on back to see the gypsy.
He can move you from the rear,
Drive you from your fear,
Bring you through the mirror.
He did it in Las Vegas,
And he can do it here."
I think the suggestions that interest rates are going to rise is a scare tactic. Higher rates will help control inflation but those higher rates will kill this already deceased economy. Is inflation really an issue right now?
The liberty of discussion is the great safeguard of all other liberties. --Macaulay.
Have you done the math with a mortgage calculator? Yahoo finance has a good one, scroll down to the bottom of the page, in the blue box. If you have trouble finding it I'll post a link.
Kevin
Yes I am aware of that calculator, but thanks anyways. I did run the numbers and the savings is there, but it'll also move me into another tax bracket by doing the refi. I haven't decided what to do yet other than gamble that the rates will drop further.
The liberty of discussion is the great safeguard of all other liberties. --Macaulay.
I believe they will drop further, good luck!
another optimist I see
thanksThe liberty of discussion is the great safeguard of all other liberties. --Macaulay.
Watch the fed fund rate.. the nano second the fed fund rate climbs, sign the deal.
You won't be at the bottom but darn near! (the bottom would have been the previous week).
Thanks Frenchy
Inflation will come...
Lock in as far as you can. Do not overleverage. Count on having to sign at 8-10% 5 years out. I think worse in the mid term.
As things get more expensive--today's currency and tomorrow's investment gets devalued. (Devaluation of currency will drive inflation). Self fulfilling prophecy really.
It has happened before... Just a cycle.
L
GardenStructure.com~Build for the Art of it! Decks Blog
Yes it's just a cycle but it's fueled this time by some pretty serious inflationary reasons..
We haven't paid a dime of the cost of the war in Iraq/Afganistan.
We've lost much of our manufacturing base.
We no longer have much in the construction industry to generate income.
Our taxes don't currently meet the expenses of running the government and we as a government are already 2 trillion dollars in debt with a much larger amount of debt in the private sector.
In the past the consumer bought our way out of recession but todays consumer is so deeply in debt that is no longer possible..
You can anticipate severe inflation.. either a sudden brutal rise all at once or a long dragged out process over many decades..
As a money manager, I'll stick my 2 cents in here.
The banks are not lending to those who no longer meet their credit requirements; and, they want to keep cash to re-liquify their capital requirements. It has nothing to do with lending long term or not. They are concerned about their own financial health.
That being said, regional banks are in relatively good stead. Generally, most banks do not put a mortgage on raw land. There ARE exceptions, of course. But banks do not want to hold raw land. They want collateral...a house.
I would aggressively pursue refinancing at this point. I've been right within 2-3 months on rate turns in the last 15 years. Rates are the reflection of "cost of money". That factor has been really screwed up by the government and its "bailout" b.s. But the markets are generally efficient, and are coming back to more normalized yield curves, even though there is more room to move.
I would cousel: go get that refinance loan.
In other words, free-market capitalism is the best path to prosperity.
We are in agreement. I suspect if we're not at the bottom of mortgage rates now we aren't very far from them.. The charge upward is going to come quickly as soon as recovery is even sniffed at..
I can see a few years out that 4% fixed mortgage is going to be extremely sweet.. but if you miss by even 30 days the interest cost increase will be really significant..
true.
At its most basic level, capitalism offers people the freedom to choose where they work and what they do … the dignity that comes with profiting from their talent and hard work. … The free-market system also provides the incentives that lead to prosperity -- the incentive to work, to innovate, to save and invest wisely, and to create jobs for others.†-President George W. Bush
In other words, free-market capitalism is the best path to prosperity.
I'm in agreement.
Do your refi sooner than later. I've always noted that rates are best about the end/first of the year. And the available capital now to support these lows rates is coming from the feds. When they run out, the market will take over - at higher rates. Which will push those loans done early (from an investor's stndpoint) to discounts in the marketplace.
The window is not that big.
I agree sooner is better, the sure thing over the possibilty of a lower rate.
I have to spruce the place up, new roof, paint, possibly romove beadboard, spray foam insulation, if time permits. I need some warm weather.
Kevin
Another thing to keep in mind is that you'll get a better rate (usually) with a shorter term, and with rates this low you can probably knock 5-10 years off the term and still have payments about equal to what you'd of had 18 months ago.
The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. -John Kenneth Galbraith
One thing I never understood is why raw land isn't considered collateral.The liberty of discussion is the great safeguard of all other liberties. --Macaulay.
Depends on the bank.
Mine very much considers raw land collateral
yet I see alot of folks (edited to add) 'and banks' still say otherwise
The liberty of discussion is the great safeguard of all other liberties. --Macaulay.
Edited 1/29/2009 7:24 am ET by misfit
That's why I'm a big fan of smaller local banks...........
Not so much the big ones.
That's where I got my lot loan - a small local bank. I was baffled by how well they competed with the other three local banks that also wanted the business. The brokers and big banks didn't want to touch it.
The bank lent me a half million for a one acre vacant lot.
'Course, it's Lake Michigan lakefront.
I can understand land out in the sticks, off grid, but location like yours is what I was thinking about.The liberty of discussion is the great safeguard of all other liberties. --Macaulay.
"One thing I never understood is why raw land isn't considered collateral."It is, but to a lesser extent than an improved lot. Land is considered less liquid, harder to get rent or a sale than an improved lot, therefore more risky. It used to be you needed 20% of appraisal down on a house and 50% on land. Maybe the lender you were talking to just didn't want to cover another loan for dirt.
"Land is considered less liquid, harder to get rent or a sale than an improved lot, therefore more risky."
Maybe that's what I'm missing- the risk part. Land is not unlimited, figuratively speaking, which makes me think it should have just as much if not more value than the house it contains.
Yet some old neglected shack can be considered more valuable than the land it sits on?The liberty of discussion is the great safeguard of all other liberties. --Macaulay.
"It is, but to a lesser extent than an improved lot."
I somehow missed that. Excluding places like remote locations off grid, unimproved land can be improved. And in many cases, for less expense than what it would take to build on. And since land is in limited supply, I would think it would be worth more and less of a risk. Does that make sense?
Just thinking out loud, because I'm sure someone will come back with a legitimate answer to dispute what I said.The liberty of discussion is the great safeguard of all other liberties. --Macaulay.
water is the critical concern with unimproved land.. everything else can be dealt with, but if water is too scarce or too deep the land is worthless.
I wouldn't worry about a spike in mortgage rates.
Two hours ago:
The Federal Reserve, acknowledging the economy has continued to deteriorate, signaled Wednesday that it will keep using unconventional tools to cushion the fallout, including keeping a key interest rate at a record low for quite “some time.â€
The Fed agreed to keep the targeted range for the federal funds rate between zero and 0.25 percent. Economists predict the Fed will leave rates at that range through the rest of this year.
The Fed has absolutely NO control over mortgage rates. Nor long term rates of any kind.
All they can do with rates affects the short end of the curve only. The markets - supply and demand - control mortgage and long rates. Unless there is a temporary governmental "interference" in the process - like right now. And that is being done via different means.
Now the Fed saying things will be low for a bit is certainly good news, but that falls under the classification of "moral suasion." Or they "talk" the rates into a certain behavior. It's how the marlets respond to this "talk" that really determines where rates go.
I thought mortgage rates had more to do with long term T bills.
The longest T Bill anyone can get is one year in length. And those are auctioned off by the Treasury based upon investor demand. Technically, bills are auctioned off at percentages of face value. Say 94.5, or 97.2%, etc. They all get paid back at 100%. The amount less than 100 is calculated to figger the yield to maturity, thus detrmining the rate.
Bills are Government issues of less than 366 days. Notes are 366 days to 10 years in length. Bonds are over 10 years to 30 (or more).
Where the Fed can play games with rates is through repurchases. They will specifically buy up a bunch of notes, bills, whatever, targeting a characteristic they believe will have the desired effect. That being whatever devil they believe is causing the perceived ill of interest. This could be used to bring a more normal yield curve in place, or to act as a lead for the market to follow, or some form of money magic.
Or, by issuing only in a specific maturity range, like Clinton did. No 30 year action. Things like that changes market demand.
Mortgage rates as I'm most familiar with, more closely follow 10 year notes. 'The theory being that most people (more than 50%) will have moved or refinanced or paid off their obligation by that time.
Edited 1/28/2009 7:21 pm by peteshlagor
I had heard that the Fed was going to buy 10 year notes, but that may have been speculation.
The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. -John Kenneth Galbraith
Right.
The Fed said it is prepared to buy longer-term Treasury securities if the circumstances warrant. This is a stronger statement than they made at the December meeting, when they said they were merely evaluating that option.To the OP:
We're in a recession, rates will stay low.
And, unfortunately, so long as rates remain low loans will be unattainable.
The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. -John Kenneth Galbraith
Why is that?The liberty of discussion is the great safeguard of all other liberties. --Macaulay.
When rates are low the banks figure it's safer to just sit on the money. Especially when the long-term outlook is for inflation.
The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. -John Kenneth Galbraith
No, it's not that simplistic. It's related to their need to reduce their debt/capital ratios, and to reliquify in anticipation of coming problems, (commercial real estate). Furthermore, banks that did NOT get into trouble have not changed their lending habits...thus there is little concern short term about inflation. Banks' deposit rates are more closely linked to their rate outlook, vis-a-vis inflation. Their mortgage rates are more closely linked to national rates, prime rates, and 30 yr/10 yr rates. My internal interest rate prediction are for the 10yr and 30 yr to increase in the near future...they are way over bought. Thus my recommendation to lock in that mortgage. I have been buying TIPs for my clients. Only thing that makes sense to me right now in fixed income.
At its most basic level, capitalism offers people the freedom to choose where they work and what they do … the dignity that comes with profiting from their talent and hard work. … The free-market system also provides the incentives that lead to prosperity -- the incentive to work, to innovate, to save and invest wisely, and to create jobs for others.†-President George W. Bush
In other words, free-market capitalism is the best path to prosperity.
A 30 yr mortgage typically lasts for 10 yrs. The closest instrument which has similar risks is the ten-year treasury, which makes it an excellent gauge to track mortgage rates.Mortgage rates are not set by the Fed or any other entity. They can be influenced by the Fed, and the Fed has announced its intentions today to keep the federal funds rate between zero and .25%.
If I understand you correctly, your in the camp that believes rates will remain low or drop? At least for the immediate future, say 1-2 qrtrs?
Yeah, all signs point to low rates for the next few quarters.Do you think they will hit 6% soon?
"Do you think they will hit 6% soon?"
Did you mean to say 4%. some places they are below 5%, albeit with points.
Sorry, I thought you were thinking rates may rise soon. That may happen but from what I've read I think it is unlikely.Current rates are around 5% with half a point fee.What's half a point interest difference in $100k loan, maybe $25 a month?
The interest rate is very good now. The hard part is getting qualified.
We'll, indirectly they do. By keeping their rate so low, it makes other investments - like mortgage backed securities - a more attractive place to park money. This spurs more competition for mortgages, which drives the rates down.
Tu stultus esRebuilding my home in Cypress, CAAlso a CRX fanatic!
Look, just send me to my drawer. This whole talking-to-you thing is like double punishment.
I can understand your wish for the lowest "rate". But think of it this way "Is 5% really that high a return to pay? I might get 4.5% in 6 months but in the mean time the house sits cause I don't have the cash to finish it. It could be finished in 6 months and I can sell at a profit".
I think interest rates will turn around and get really high for a while. My first house was at 13.5% but the market could not sustain that rate for long and it dropped to 8% and stayed there for many years.
Take the 5% rate, just watch the "add ons" like points for this and fees for that.