Tag Archive for: rising rates

Rob’s Report – Covering the Market, Why a Heloc May Not Make Sense and How a Concurrent Closing May be A Great Solution in Buying in Today’s Market…

It’s been some time since I sent out a newsletter on rates, the market and food for thought in the world of real estate…

What’s prompted me to send a report now has a lot to do with rising home inventory, rising interest rates and the Dow Jones, down by 11.32% year to date currently resting at 32,654 down from 36,799 back on January 4th.

About RATES…

First a foremost as we have seen rates increase from 2.75% in December of 2021 to 4.75 (and higher) to date with only a .75 increase in rates by the Federal Reserve, the Federal Reserve is expected to increase rates 4 more times pushing Prime from a current 4% to 6% in the future and who knows how much higher residential, commercial, and reverse rates will go.

About HELOC’s…

With rising rates, why would a consumer choose a HELOC for cashout over a fixed rate 1st, when HELOC’s can only keep pushing up in rate as most of them are tied to Prime plus a 1 Margin or as of today, 5%.  If the Fed continues with what they said, then a HELOC’s future rate, will be closer to 7% in the near future based on what they are predicting.  In summary, why not lock into a fixed rate now?  In addition, there are some things to consider on why a HELOC may not make sense:

  • Were in a rising rate climate with prime now at 4% plus a margin of 1 (or higher) resulting in a rate of 5% or higher in rate
  • Due to changes in the tax code back in 2018, one cannot write off HELOC’s or 2nd’s, interest wise.
  • Due to their volatility…In the past if property values dropped, HELOC lenders would cut the “line” amount or freeze the account all together.

If you’d like to look at a 1st mortgage refinance, please complete the following…

https://101loan.com/refinancing/

REVERSE MORTGAGES’s…

With rates climbing, home values potentially leveling out and the Dow Jones down by 11% in 2022, much of what we have seen ever 10 years seems to be starting over again and consumer confidence is dropping.  If your over 55 years of age and have at the least 45% equity in your home, you might want to consider the benefits of a fixed rate reverse mortgage.  To determine your options without running credit, please go to https://101loan.com/reverse-mortgage-start/ and complete and we will research your options and provide them to you.

CONCURRENT CLOSING’s and Their Benefits…

If your thinking of buying a home and bridge options don’t work for you at https://101loan.com/blog/do-you-want-to-buy-first-and-then-sell-later-bridge-financing-may-be-the-answer/, you might consider a concurrent closing based on the following steps:

  1. Get pre-approved based on selling current home.
  2. Start looking at new homes and list your current home.
  3. Accept an Offer with a flexible long closing and with a flexible long rent back after you close.
  4. Make a contingent offer or no contingent offer depending on when your closing date is on selling.
  5. Close on the home you are selling and then close on new home or concurrently close at the same time.

Since the market is still strong and more inventory comes on each day, this is a solution you may want to consider as the incredible savings compared with any of the options in the above lin

If you would like to purchase or refinance a property or obtain a reverse mortgage and rid yourself of mortgage payments, 

BTW…To Learn More About Inflation and the Market, go to here.

Best Regards,

Rob McCarthy

Senior Mortgage Advisor

www.101Loan.com

408-377-4123 o  650-465-8957 c

101 Loan – 1601 S De Anza Blvd, Suite 260, Cupertino, CA 95014. CA DRE #01165697  NMLS #121019

Products/Services/Accolades:

  1. Residential Financing for Purchases and Refinances on 1 to 4 unit properties.
  2. Reverse Mortgage Financing to include Conforming, Jumbo, HELOC Jumbo’s.
  3. Commercial & SBA Financing to include Multifamily, Office, Retail and Light Industrial.
  4. Access to over 50 banks with over 200 “Five Star” Reviews on Yelp, Google, Facebook and Linkedin.

Note: Interest rates and loan programs quoted are subject to change without notice or until locked and approved by lender.

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Inflation, Rising Rates & Low Housing Inventory

Cash Out Refi’s Might Go Away?

 First and Foremost…
I just read an interesting report on how lenders may eliminate cash out refinances on conforming and jumbo loans. We have seen the “add” for cash-out refinances get super expensive lately.  It appears the Federal Reserve doesn’t want borrowers pulling equity out of their homes.  They feel home values may go down due to the negative impact of Shelter in Place and Covid-19.
For more info, see quote and link below:
 
“Many lenders have eliminated or restricted cash-out refinances, financing for investment properties and some for second homes as well,” Cohn says. “Jumbo lenders have also tightened their guidelines.”
 
https://www.cnet.com/personal-finance/6-things-to-know-about-refinancing-right-now/ 
 
Next…
A listing agent in the east bay recently posted a great Yelp review on the service we provided her. I just love when we can help Realtors and their clients successfully & smoothly close on purchases. 
To view the review, click here: https://www.yelp.com/biz/101-loan-mortgage-san-jose-2  (See Testimonial from Bette dtd. 4/28/2020)
If you’d like the same care, please contact me.
 
Best Regards,
Rob McCarthy
Senior Mortgage Advisor
www.101Loan.com
408-377-4123 o 650-465-8957 c 408-608-1921 f
101 Loan – 1601 S De Anza Blvd, Suite 260, Cupertino, CA 95014
CA DRE #01165697 NMLS #121019
Products/Services/Accolades:
1. Residential Financing for Purchases and Refinances on 1 to 4 unit properties.
2. Reverse Mortgage Financing to include Conforming, Jumbo, HELOC Jumbo’s.
3. Commercial & SBA Financing to include Multifamily, Office, Retail and Light Industrial.
4. Access to over 50 banks with over 200 “Five Star” Reviews on Yelp, Google, Facebook and Linkedin.

With the Federal Reserve Lowering Rates, Why Have Mortgage Rates Gone Higher?

As you know the Federal Reserve lowered rates, specifically the Fed Fund was lowered to 0.  This means the bank lending rate has dropped, lowering rates at the street level at tad, but no-where near where they were weeks ago when rates were lower.

Rates are still up because of the following…

  1. Lenders are slammed with so much business. Their turn times are much slower now.  This has caused them all to increase their rates to handle the volume they currently have locked.  By lenders increasing rates, their incoming business slows down allowing them to catch up.  Once they catch up, they typically will lower rates again.
  2. The Corona Virus has forced employees at banks to work from home, slowing down the virus.  Working remotely unless completely set up for this, has caused a slow down of work efficiency causing work delays.
  3. See my response from a few weeks ago below on what a Fed Drop really does*
  4. Lastly, unrelated to rates, County Offices have closed and many appraisers are staying home and not taking on new business.  This will cause further back-ups for lenders and consumers.  We know this is short term (hopefully only a week or so) but this will delay “most” refinances and purchases from closing in the near term.

Update on Rates from a Few Weeks Ago…

Clients are Asking…Why Have Rates Not Gone Down Today?

As you may know the Federal Reserve lowered the Fed Fund by .5% today.  You may be wondering how this will affect interest rates you are seeing for your home mortgage.

I hope the following sheds some light on the subject:

Typically, a Fed cut has no direct effect on mortgage rates.  The Fed Fund (which they lowered) is the overnight lending rate.  Banks charge this to each other when they have a surplus of reserves (deposits) required by the Federal Reserve.  Banks have to keep a certain amount of reserves in relation to their deposits and so when they get more than what they need, they lend out the surplus to other banks that are short in reserves using the Fed Fund Rate.  So what does this mean to you the home owner?

A fed cut like today’s, lowers rates on bank products like car loans, business loans, credit card rates, home equity rates.  Mortgage loans, however are influenced by Fannie Mae and Freddie Mac, Portfolio Lenders and of course Mortgage Backed Securities and Bonds.  In short, when the Dow or Nasdaq starts falling, investors put their money into MBS’s and Bonds causing mortgage rates to go lower.  When the stock market corrects and starts going back up, these investors quickly move their money back over to equities and mortgage rates we see, typically go up.

Now, the reason we have seen rates drop in the past week or so is due to market uncertainty.  The Corona Virus and its impacts local, national and international markets.  Example, if Apple can’t manufacture cell phones in China due to impact of the Corona Virus, their sales and revenue will significantly drop negatively.  This will affect their stock price and stock market as seen in the last week or so.  The Federal Reserve is worried that this will happen to other industries such as travel, manufacturing, tech, etc so they are being proactive in lowering the Federal Fund Rate.  Eventually this move will filter down to interest rates for home loans, but in the near term it will not as seen last year with 3 Fed Fund drops (last year) only resulting a slight reduction of mortgage rates.

Conclusion…

Rates will definitely go lower, but unfortunately it will take some time to do so based on the factors above.  When rates do drop, we will update you so you can take advantage of the rate and payment savings.  If you would like to get in ready position so you can act quickly when rates do drop, please contact us.

Best Regards,

Rob McCarthy

Senior Mortgage Advisor

www.101Loan.com

rob@101loan.com

408-377-4123 o  650-465-8957 c   408-608-1921 f

101 Loan – 1601 S De Anza Blvd, Suite 260, Cupertino, CA 95014

CA DRE #01165697  NMLS #121019