Mortgage Rate Watch

Provided courtesy of: http://www.mortgagenewsdaily.com/consumer_rates/

Small Reprieve For Recent Rate Spike
Tue, 23 Jan 2018 20:17:00 GMT -

Mortgage rates finally managed to move lower in a small but meaningful way today--something they haven't done in more than 2 weeks!  During that time, we've seen average mortgage rates improve on 2 occasions, but in both cases, the gains were small (some lenders even went slightly higher).  That's the good news.

There are two caveats.  The first has to do with the size of today's improvement.  While it is indeed bigger than recent examples, many prospective borrowers will find it underwhelming.  In isolated cases, it may get a loan quote down to the next .125% of a percent lower, but most quotes will simply have slightly lower upfront costs (while the rate itself remains unchanged).  Looked at another way, we could say apart from yesterday, today's rates are the highest in more than 9 months.

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Mortgage Rates Set Another 9-Month High
Mon, 22 Jan 2018 21:34:00 GMT -

Mortgage rates pushed up to yet another 9-month high today--something that's become all too common in the past few weeks.  Just as troubling is the fact that 10yr Treasury yields--the bigger, more important neighbor that shares the street with mortgage rates--are operating at their highest levels since early 2014.  Mortgage rates aren't directly tied to Treasury yields, but big momentum in Treasuries tends to spill over. 

Incidentally, both Treasuries and MBS (the mortgage-backed-securities that underlie mortgage rates) were roughly unchanged today.  The problem is they were much weaker on Friday afternoon and mortgage lenders didn't fully adjust for that fact with Friday's rate sheets.  That left them with a bit of catching up to do this morning.  In other words, lenders needed to push their rates just a bit higher to get caught up with Friday's market movements.

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Worst Week Since June for Mortgage Rates
Fri, 19 Jan 2018 23:24:00 GMT -

Mortgage rates remained at 9-month highs today, with most lenders in worse shape than yesterday.  In the morning, the sky hadn't yet fallen, the average lender was right in line with yesterday's 9-month highs, but at least we weren't any worse off than yesterday.  Things changed in the afternoon as bond markets weakened abruptly.  Many lenders issued negative reprices, thus leaving the average lender noticeably higher than yesterday.

Today's weakness makes this the worst week for rates since late June and one of only 3 weeks with as much of a rate spike since 2016. For the third day in a row, I'm repeating the same mantra: any time we're pushing long-term highs, it's a good idea to remain defensive in terms of locking vs floating. 

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Buying an Investment Property

Buying an Investment Property

Don't Buy Your First Investment Property Until You Read This

Are you thinking of buying a rental property as part of your investment strategy? Here are a few things you need to think about.

Real estate can be an excellent part of anyone's investment strategy. However, before you buy your first house, condo, duplex, or apartment building to rent out, you need to have a good idea of what you're getting into.

Here are three things to be aware of before jumping into real estate investing -- and an alternative investment you could use instead.

The income can be inconsistent
When you buy just one investment property, you are effectively putting all of your eggs in one basket, just as if your entire portfolio consisted of stock in one company.

While owning an investment property can certainly be lucrative, it leaves you vulnerable to certain risks.

For example, if you buy a $100,000 investment property, you should be able to earn $1,000 in rental income per month, based on the general rule that properties should rent for about 1% of their value. However, what if you need several months to find your first tenant? Or what if your tenants stop paying rent and you have to evict them (which could take quite a while)?

If such a situation occurs, not only will your investment produce no cash flow, but you're still stuck paying for things like the mortgage, property taxes, insurance, and maintenance.

Do you really want to deal with tenants and maintenance?
The first mistake I made when I bought a rental property was underestimating how much work can be involved in dealing with tenants.

Finding quality tenants can be a challenge in itself, but the real issues tend to come up after they move in. For example, if your tenant is late on rent, do you really want to chase people down to find out what's going on? Do you have the first clue of what to do if you need to evict a tenant? And what if they are making too much noise, letting other people live there, or are violating any other part of the rental agreement?

Don't forget about maintenance and repairs. If you manage your rental property, be prepared for the phone to ring in the middle of the night if the tenants have a plumbing issue.

If you don't want to handle these situations, the alternative is to hire a property manager. This should cost you about 10% of the rental income you bring in. This can be well worth it, but it will cause your profits to take a serious hit.

Make sure that you account for "all" the costs
Speaking of the cost of a property manager, you might be surprised at how much it really costs to own a rental property.

In the example cited earlier involving a $100,000 rental property, let's say you put 20% down on the house and collect $1,000 in monthly rent. By financing the other $80,000, you can expect your monthly mortgage payments to be about $392 at today's rates, which might sound like an incredible profit margin. However, when figuring out the cash flow of your investment property, make sure to account for property taxes, insurance, maintenance costs, and property management.

These costs will vary based on your location and the condition of the property, but could easily add $500 or more to your monthly expenses. Also, bear in mind that many jurisdictions charge much higher property tax rates on investment properties, so make sure you take this into account as well.

Know what you're getting into
I'm not trying to talk you out of buying an investment property. In fact, if you do it right, buying an investment property can produce cash flow and build equity, creating wealth over time without a huge initial investment.

However, just like with any other investment, you need to make sure you know exactly what you're getting into and prepare for all the costs and the risks involved. If these seem like too much trouble, there is no shame in looking into alternatives, such as real estate investment trusts.

Buying an investment property can be a great opportunity.

Whether it be a house, cottage, farm, condo, or plot of land, buying real estate is traditionally a sound and profitable investment, offering both rental income and capital gains. The most obvious advantage of buying any income property is having other people pay off the debt on your investment property. And with interest rates low, there's no time like the present to jump in.

To buy an investment property you will need sound financing information and flexible loan options. When choosing a lender, loan rates are not always the most important. Because investment property mortgages are subject to specific governmental requirements, mortgages are constantly changing. It's a good idea to consult with a mortgage specialist at i Want a Better Mortgage who can bring experience and training to the table, helping you make an informed decision about your investment property mortgage options.

 

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