08/01/2024
Words of Mortgage Advice
As mortgage rates start to improve many of you may be looking to buy or refinance your home. I would like to give a few tips to keep in mind when looking at the whole picture.
Lowest rate is not always best - What I mean by this is you will see a lot of companies offering low rates but it costs a few discounts points or a lot of closing costs to do the deal. Sometimes it may be better to take a slightly higher rate with less upfront closing costs. In a potentially declining rate market, a good way to look at it is riding the rates down. So, for example, many people over the last 12-24 months may have bought a home and have as high as 8.25% interest rate, with now rates being at an estimated 6% give or take, you may be better off doing a .5% (6.5%)or so higher rate to minimize front end costs which would position yourself good if the rates improve in the next 6-12 months you wouldn't lose out and be able to do it again.
Buying a home - We have settled in where the rates are what they are right now, and you may have to get a new home. I suggest always look at all your options. I tell my clients get the house you need and want right now, and the rate can always be refinanced if they improve, but that house will not always wait on you. A saying in realtor and mortgage circles right now is date the rate, marry the house.
Cashflow is king - I am sure many of you with loans have been getting a lot of junk mail talking about all the equity in your house and trying to get you to refinance to pay off debts. This is true but you need to be aware of all scenarios. Let's say you are at a 5% rate and the market rate is 6.25% but you can consolidate and refinance rolling into your mortgage 50k of debts lowering your monthly consumer debts. But if you have an average rate on that 50k debt of 12-14%, and your new mortgage rate is now 6.25% only raising your mortgage rate 1.25% this is a win. Because if you have 1500 of monthly debts you paid off, but your new mortgage only went up 500.00 then you just had a net savings of 1000.00 a month. That can help a ton for most households. But I urge you to be careful, because market values are high right now and are steadily increasing but you don't want to eat up all your equity and then run back up your 50k in debt again.... make life changes ASAP so you don't tend up in that situation again because the equity next time may not be there to get you out of the bind. Be mindful.
What controls mortgage rates - Many people think when the FED cuts rates it causes mortgage rates to come down. This is not true. FED rates are the rates offered to banks to lend money to consumers. These are like auto rates, credit cards etc. It does affect helocs and commercial loans. Mortgage rates are controlled off of the economic data. Inflation is the biggest factor that makes mortgage rates go up also the economy. All the economic data that is announced every month like job numbers, quarter projections, and GDP numbers for examples. All of these will hammer on the rates.
Rates are trending down but it's doubtful we will ever see them like they were 3 -4 yrs. ago when they were in the 2-3% range again. If you are waiting on that to decide what to do you will be waiting a while. And while you are waiting housing is still going up. That was the lowest in history of mortgages of over 80+ years. I hope all this helps and let me know if I can give any advice just shoot me a message.
