Where readers ask and we try to answer. This one we’re actually doing for ABC7 News. David Louie is running a story tonight at 6pm, and was hoping we could help him and their viewers out. So….readers, and real estate peeps, don’t disappoint! ;-)
Given the fact that interest rates took another dip recently, and the stock market has rallied, when does it make sense for homeowners to refinance (assuming their loan will soon adjust), and interested buyers to finally purchase? We were wondering what the difference in some of your readers’ payments would be (up or down) should they refinance today, and if they watch rates religiously, hoping to time their decision perfectly.
Let’s see if we can get a good discussion going here.
The most recent mortgage rates:
6.0% for a 15 year Jumbo (loan amount >$417,000)
6.5% for a 30 year Jumbo
5.625% for a 5/1 Jumbo
5.875% for a 7/1 Jumbo
These numbers are from New Source Financial, and here’s a mortgage calculator to help you get started.
As we’ve said before, theFrontSteps is getting noticed, and Realtors and Mortgage Brokers involved with this site are seeing the benefits. Tim Wood is thanking us for referring him to David Louie and ABC7 News. No worries Tim, it’s our pleasure.
Readers…we turn the floor over to you.
–Interest rate cuts can save money [ABC7 News.com]
Assuming the above rates, if I refinanced today, my mortgage payment would increase by $350/month. I have a jumbo loan. I’m set for a while. Yes, I watch rates religiously.
i watch rates pretty darn closely and it’s not just because i’m in the biz. i have a few more years before my loan resets, but if the rates get to a point where i can secure a 30 year loan for a good price, i’m gonna do it.
I have several clients that are waiting in the wind to purchase, but there is nothing there for them to buy. They are all thrilled that rates have come down. Now if inventory would come up, we’d be good to go. Me personally, I’d have to pay much more if I refied today. I have several clients that purchased a couple months ago however and they’re already talking about refinancing.
I’ve heard through the realtor/lender grapevine that the calls have been coming in to refinance. I know that after yesterday’s news from the FED that the volume of calls has increased. This is definitely a great time to refi. My partner and I have a 10 year ARM at a great rate (still well below current jumbo rates), with 7 years to go, I’m even looking at whether it makes sense to jump into a convential 30 year fixed. Weighing the options now. I think that the FED will make an additional cut next week on top of their emergency move. I suggest contacting a lender and being in the loop on how rates are affected by these cuts.
As a realtor I too am refinancing to a 30 year fixed.
I think its a great time to lock into these lower rates.
Call your broker or your realtor to get in touch with a mortgage broker!
I spoke with a lender yesterday who has even more aggressive rates than those shown.
My wife and I bought our current place just over a year ago and have a great 30 year in place but we can save over $600 by switching to a 10/1 @ 5.5%. We know we won’t be in the house that long so it becomes a very attractive proposition.
My suggestion is that you contact your agent or mortgage broker and have them run scenarios on the different packages available. Remember that the rates are going to be changing almost daily so what’s true today may not be tomorrow.
In terms of inventory, just wait. I’m feeling a little like ‘The Amazing Carnac’ and foresee the spring inventory cycle ramping up. If you don’t see it, keep your eye’s here on the pocket listing page. It’s a great source of things to come.
[Editor’s note: Thanks Damon. Feel free to send us those pocket listings.]
For refis, a borrower has to save enough for them to feel it in their monthly budget, and that’s an individual decision. They also have to get a no-cost refi or break even on closing costs within 6-18 months, depending on their time horizon in the loan/house. Otherwise the monthly savings on their “great rate” is just an illusion. For purchases, the home has to be priced right, period. Fair market value is a street-to-street dynamic, but if you’re looking at the whole SF market, I think there’s still room for a 5-10% correction. The thing is, SF tends to find the bottom faster than other markets then people rush in, so buyers can’t sleep. If they’re in the market, they need to keep looking evaluate each price against their long term investment goals, and be ready to pounce.
It is important that homeowners choose a mortgage broker who will assist them in regularly watching the rates to see if they should refinance. This is something that should be revisited again and again over the years. Buyers also should do the math to see what they can afford and seriously get out there and look at what kind of property will work for them. By having a Realtor show you how similar properties have appreciated over just a few years, it should be easy to see that your time to buy is probably right now!
are there any mortgage brokers still in business? where are they getting any banks to return their calls?
seriously!
we went through the most excruciating full doc refi’d in august but the 30 year is now totally begging us to refi again
We still have a big gap between Jumbo and Conforming rates – what’s the chance that the $411K (or whatever it is) limit that defines “conforming” will be moved closer to reality for the SF Area?
arnold asked congress for that today. raising it by about 200k. a good compromise.
Guys,
This 75bps rate cut is a GODSEND for debtors (mortgages, car loans, small businesses etc! The 10-yr yield is basically pricing in the Fed Funds will drop by 50bps next Wed to 3%. 10-yr is at 3.6% now. The 10-yr was at 3% in 2003 with the Fed Funds was at 1% for reference sake.
I just refinanced my superjumbo rate from 5.5% down to 4.625%. Moved from a 5yr ARM with 3 years remaining to a 3 yr arm, that still amortizes over the same duration. I could have locked in 5.25% for 5 more years, but why bother. The three years of savings is already 2X the 5 years worth of savings at the higher rate. The fee paid was under $350 bucks, and the payments drop by over $650/month, while principal payments increase by $200 due to the lower rate to boot.
Furthermore, I also refinanced my 30-yr conforming fixed from 5.75% to 5.25% with zeropoints/fees on my rental property. I could have paid $2650 to buy the rate down to 5%, but I decided not to. That’s another savings of $250 a month, meanwhile, I just raised rent by $200 a month, equating to a $450/month gain alone.
I am not special and EVERYBODY can basically get similar rates if they just call their existing lender. The 30-yr fixed conforming rates at sub 5.5% are just so good. And the 10-yr yield isn’t going much lower after a 50bps cut next week, b/c it’s already baked in.
I’d refinance now. It’s always a good idea to refinance if you can get a 50bps cheaper loan with a 2year fee breakeven period or less.
And James, yes, the Senate committee is asking to raise the conforming loan rate from 417K to 650K. That is huge if it happens.
H
All this refi talk is great for people that have lots of equity and can justify the cost / benefit of their home ownership. But these refi’s and the fed’s moves are all just bandaids for those whose homes are in debt for more than they are worth (or can afford) and is prolonging a larger problem. I suppose it’s the correct economic policy to not let the US sink into a massive recession, but some pain here is inevitable. If people start losing their jobs the unsecured debt (i.e., credit cards and banks) are going to get killed when people stop makng payments. And the housing bubble will deflate as people start to default at an panic rate. As much as I’d like to see housing prices fall back to a better equilibrium, I personally do not want this since the broader market impacts would be really bad. But it is what I think will happen. The government is going to hand out a few grand to certain famlies to help out, but this is just another band aid. If anything they should reduce corporate taxes and help companies preserve jobs. People need paychecks to keep this market from getting really bad,
Just refied, and will now save $380/month. My friend got a 7% rent increase.
eddy that is already happening. check it out here:
http://calculatedrisk.blogspot.com/2008/01/capital-one-ceo-managing-as-if.html
i don’t think you’ll find a lot of sympathy on this board for folks that bought with less than 20% down and without being able to truly afford the property they acquired.
i’m guessing here but the average frontsteps reader probably has either 300k in liquid investments (cash or stock in a non ira/401k type account) or at least that much in equity if not more.
Good site James. Thanks. Lot’s of interesting excerpts on the site. Found this link there saying 30% correction in the housing market. I don’t think this is probable / possible, but it’s interesting that there are professionals willing to put it on the line.
http://www.marketwatch.com/news/story/merrill-lynch-says-us-nationwide/story.aspx?guid=%7B113721E5%2D3D7D%2D4938%2DB5E1%2D44401BD02AA4%7D
The economy is fragile and god forbid that anything like an Enron or other corporate scandle were to hit the market at this point.
Now this, on stimulus package planned:
“The package is also likely to temporarily raise the conforming loan limits for Fannie Mae and Freddie Mac, beyond the current $417,000, which would allow the government-sponsored companies to buy bigger loans in areas with high housing costs. Rep. Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee, said the new limit would be 125% of a metropolitan area’s median housing price, up to a cap of about $700,000.”
CNBC just reported that the limit has been raised from $417K to $625K…
“…the new limit would be 125% of a metropolitan area’s median housing price, up to a cap of about $725,000.”
What is the Bay Area’s “median housing price” – 125% of that should be the new limit for us!
[Editor’s note: Does one of you have the link to said article?]
See wsj.com – for obvious reasons the entire article cannot be posted here.
[Editor’s note: Agreed and thanks, here is the link to the article for other readers to be on the same page.]
If the conforming limit increases to $620Kish… the 700-800K properties in SF are goign to get a big boost.
= Band-aid. Good for owners in lousy mortgages. Too bad it doesn’t lower the value of your purchase price. Unlike years past, this would have further fueled a bubble, but this is just slowing the burst. I think it’s a good move, but I still fear the worst is ahead.
Check out mortgageplan4you.com, it will answer all of your questions as to when it is a good time to refi. Fed rate cuts mean that the banks pay less on the money they borrow. it doesnt neccessarily mean that consumer rates are going to change much. The website will answer all of your questions and there are calculators that can use to determine if it would be worth it. There is even a calculator that will compare ARM’s with fixed rate mortgages for those of you contemplating. Thank you.
$180,000 Mortgage Only $638/mo. Compare 4 Low Quotes. No SSN Req.