Mortgage rates drop to once unthinkable lows at less than 4%

[TomCADem]

Source: LA Times

The Federal Reserve's latest effort to prop up the economy has dropped mortgages into once unthinkable territory, with 30-year fixed-rate loans available for less than 4% — a record low.

For people lucky enough to still have their credit ratings, bank accounts and home equity in good shape, the change means the opportunity to refinance at rates that once seemed unimaginable.

"I can remember when I thought 7% was a great loan," said Roger Hornbaum, a retired city of Orange employee who has already refinanced his home on California's Central Coast twice since purchasing it last year. "After the news this morning, maybe I'll be getting another call from and be trying it again sometime soon."

Hornbaum's broker, Jeff Lazerson of Laguna Niguel, said clients who pay closing costs and a 1% fee to him are refinancing into 30-year fixed-rate loans at 3.75%.


Read more: http://www.latimes.com/business/la-fi-mortgage-rates-20110924,0,3813739.story

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I think Republicans will argue that we should deregulate mortgage loans once again and encourage lenders to extend loans to anyone who can fog a mirror to jump start construction. Bring back the stated income loans!

[hedgehog]

1. If I could have had this rate 25 years ago, I could have paid cash for my kids'

college tuition and would be totally debt free today! Plus I would have employed someone to replace my leaking roof!

[dkf]

4. It's an indication that housing prices need to come down more

[hedgehog]

5. We bought this place for $60,000, but at a 12% mortgage.

We've refinanced at least twice. Remember how when you were told about savings accounts, you were told about the wonderful thing that is compound interest? Believe me, it works the other way, too. A couple extra points can add thousands of dollars to the cost of a loan.

[quakerboy]

22. a huge difference

60k at 12% has you paying 612/month on a 30 year fixed, for a total repayment of 223k.

Dropping it just 1% drops the payment to 566, and the total to 207k



60K at the 4.5% they offered me when I was looking last year has you paying less than half the original, 298/month, with a total repayment of 109k.

[hedgehog]

27. Considering we had the 12% on the full amount, we really took a

hit since the first few years you're mostly paying interest.

[JDPriestly]

28. Especially student loans.

[quakerboy]

30. I would agree with that

There should be solid loan programs in place that would allow basic life loans at rock bottom rates. Medical events(in the unfortunate absence of universal care), a home loan for a modestly priced home, a student loan at a state university.

[dkf]

2. Republicans won't argue that..

It's more likely to come from Obama who wants help for underwater homeowners.

[No Elephants]

6. Then why was the WH bill that was supposed to help homeowners designed to fail?

http://prospect.org/cs/articles?article=designed_to_fail

And why did the Obama administration consider granting lenders immunity for defective foreclosures?

[dkf]

16. Designed to fail or designed by people who don't know how to create effective legislation?

What has worked well? Lots of well meaning projects, but execution is lacking.

[No Elephants]

24. Designed to fail. I gave you a link to Democratic site that said that.

One of many that said that, in fact. Do you have a cite to anything that says otherwise?


If my sources and I are correct, the WH generated legislation was disingenous.

If your ualternative is correct, the WH generated legislation was totally incompetent.

Either way.....



I believe the sources that say it was disingenuouthe latter.

Then again, I give the White House a lot more credit for brains than most of its would be supporters.

[SkyDaddy7]

29. Just curious...Do you ever make a post that is...

not angry & combative?

[TwilightGardener]

3. Bought my house in 2010, my loan is 4.75%, and I thought that was pretty good!

[Gormy Cuss]

7. It's probably still a good deal.

We refinanced last year near the bottom of that low rate cycle and another refi now wouldn't make sense unless it was completely cost free. Next year, on the other hand...

YMMV though. It's always worth running the numbers.

[TwilightGardener]

8. Yeah...I don't think we have enough equity, housing prices are still dropping

where I live. My property taxes actually went down.

[cstanleytech]

10. Thats still not bad really, better than a 7 or higher which was standard a few years ago.

[TwilightGardener]

18. No, I'm not really complaining--just that when we bought, we thought, how could it

go lower than this? And here it has...

[cstanleytech]

37. Ya, my brother locked in around 4.6 or so when he bought he house back in april

and while its lost a little value now its still a good deal as rents keep rising higher and higher and eventually if he can hold onto the house for a few years he will be paying less for it than he would if he continued to rent though thats if the economy doesnt crash totally like the GOP is trying to make happen.

[madrchsod]

9. we went from an adjustable at 2% to a fixed at 6 but....

our payments are the same. the bank wanted out of the adjustable because they were making 0 on our loan. good thing we have over 35% in equity in a stable neighborhood. our bank does`t sell the loan and everything is in house.

[TNDemo]

11. Is there any way that it would pay

For me to refinance? I have eight years left on a 15 year loan at 5.25 percent. I am thinking not.

[LiberalEsto]

12. Pay additional principal every month

The more principal you pay ahead, the less interest that will accrue. It will also shorten the remaining term of your loan.

I'm doing this with my kids' student loans. While I'm making regular payments on the others, I'm paying down one at a time with extra principal, starting with the highest interest loan first.

[Gormy Cuss]

15. With only 8 years left, you're probably not paying that much interest.

It's not likely that you'd recoup the costs of the refi even if you got a 10 year loan.
However, it is worth running the numbers if you see a good deal.

[Tesha]

17. Roughly speaking, that person still has one quarter of their interest left to pay. (NT))

[Gormy Cuss]

20. And whether it's worth a refi depends on the dollar amount being refinanced

and the available loan products. A refi to another 15 probably isn't worth it. A refi to a shorter term may be, but that depends on the rates for those less popular loan lengths. When we were looking at refi options last year there few 10 year loan terms that were competitive with the 15 year products when all costs were considered. That's why I suggested running the numbers.

[PassingFair]

19. I've got 20 years left on mine, and no one will touch refinancing it...

unless I "cash out" the equity.

We bought when the market was low
and never sold (we refinanced once
before about 9 years ago, to take
advantage of lower rates, we went
from 8.5 to 5.875....

Now, even though we have a stellar
credit rating, mortgage companies
won't even talk to me. One person
told me that the balance owed on my
house "wasn't worth" the paperwork.

[Yo_Mama]

35. That's probably because it's a HOEPA loan

HOEPA/high cost standards are supposed to protect against predatory lending, but the problem is that the test is both rate and fees as a percent of principal. With small loan balances most homeowners are caught in the HOEPA trap, because fees will exceed the HOEPA threshold.
http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea19.shtm

If you are caught in the HOEPA trap and you have a lot of equity and good credit, start checking around at community banks/credit unions for HELOCs. Look for one with a term of 7 to 10 years, and a relatively low margin.

In some cases you can get HELOCs for rates below 3% right now, and that can really pay off over time. Be honest with the bank or credit union about what you want to do (pay off your current mortgage balance with the HELOC), be disciplined about trying to make your payment as close to your current mortgage payment as possible, and also fill out the application with something like this:

Purpose: pay off current mortgage balance, make similar payments on this line of credit and also be able to pay for (make this specific, i.e., insulate house, paint house, reroof house). If you are dropping your rate 2% you can pay down your balance a lot quicker.

The thing about the app is that to get a HELOC, you and the lender need to make it clear that this is not a HELOC structured to avoid the HOEPA requirements, and the way to do this is to make it clear that it truly will be revolving credit.

The HOEPA fee limit is 8%, which isn't much when you are refinancing a 150K loan, but it is easy to get there on low-balance loans.

There is a tremendous amount of paperwork involved and far more liability for the creditor when making HOEPA loans.

[Mosby]

25. you might save money on a 5 or 10 year loan

What I use to "run the numbers" can be found at the ms office template library, its an amortization speadsheet. (I run it with openoffice) what is great (and different than what you can find on a million dif websites) is that after it calculates the monthly pymt it drops every month into two columns one principle and one interest so if you input your current loan you can use the sum funtion to find out exactly how much interest you will be paying for the rest of the loan (you need to know appx which pymt your at). Then input the new loan and compare interest amounts.

I refied last year, 8 years into a 20 year loan that was at 5.25. I'm going to save about 41K on the new 15 year loan.

[sense]

32. We were just able to

do a re-fi at 3.25% and paid less $2000 in closing costs! Our payment went down so far that we were able to switch to a 10 year loan. We're paying a bit more than we were, but we've shaved about 10 years off the loan we had. We also found a site on the web where honest loan brokers have signed an ethics pledge about how they'll treat their clients. We chose the only broker who signed the pledge in our state and it was a great experience!

I had contacted several brokers I found using bankrate.com, as recommended by Clark Howard, and they all lied to me and tried to quote much higher rates than Bankrate said they were offering. Even our local credit union's broker lied to me about their rates and this was after signing up for their daily email telling me the rate they had available each day! I called him on it and he continued with the lie..... until I called his supervisor, but by that time I was quite done with them.

I'd highly recommend this site. http://upfrontmortgagebrokers.org/

[Yo_Mama]

34. Unlikely

Not at 5.25%. By the time you pay points plus closing costs you're not that much better off usually. Unless, that is, you still have a high principal balance? However if you are really pushed on making that payment you could extend the term a bit and maybe save yourself something each year without doing yourself too much overall damage maybe because you are dropping the rate.

Try this site, enter in your remaining principal balance plus 1% (points) and $1,000 (closing costs), and figure a ten year term.
http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx

If it works out you can think about it. Costs might well be more than 1K, though.

If your principal balance is low it's a HOEPA loan and nobody's gonna want to to do it, though.

[demigoddess]

13. yes, but weren't they actually selling more houses in the 70s

when the interest rates were 14% or some such. I knew a neighbor who bought a house at 14% about 1979 or 80. But then we all had jobs in those days.

[Fearless]

23. Its the same deal with outsourcing jobs and such...

Sure if we make the products here paying people a fair wage they are more expensive to buy... but likewise you can afford them because you have a good paying job. Unlike now where people can barely afford essentials on average and still can't afford a lot of cheap crap from China.

[zalinda]

14. Too bad that those that really need it won't get it.

It will go to the haves, which in turn will give them more. The poor slob who lost his full time job and is trying to get by on 2 part time jobs and trying to pay a 12% mortgage, won't see any help. Another gift to the rich.

zalinda

[harun]

26. Sad but true. I know of no one who needs help with their mortgage who has had

anything help them whatsoever. Gov't is helping the big banks and the have more's.

Wish I could refinance but my place would never appraise at what I need it to.

[vminfla]

21. Closing Costs eat up my return

OK, I am paying 5%, but am on the last 5 years of a 20. Going back up to a 20 year at 4% would reduce my payments to close to nothing, but the closing costs would kill up the savings.

[Yo_Mama]

33. You're right

At the end of an amortizing mortgage, your payments are composed mostly of principal, so refinancing does very little for you as long as you can afford to make your payments.

[Marnie]

31. Another chance for the rich to get land and properties cheep.

Since the wealthy are the only ones with money they can pork up on abandoned and defaulted property cheap and hold onto it at low interest rates until property prices sky again.

[reformist2]

36. They're doing all they can to prop up real estate, but it just isn't working.

[workinclasszero]

38. Its like Zen

What if they cut mortgage rates to less than 4% but nobody had a job?:shrug: