Mortgage Rate Watch

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

Mortgage Rates Lowest Since September After Jobs Report
Fri, 07 Dec 2018 20:55:00 GMT -

Mortgage rates held on to their recent improvements today after the important Employment Situation (the big "jobs report") showed November job creation was lower than expected.  In general, weaker job creation is good for interest rates because it speaks to slower economic growth and inflation (both of which are enemies of rates).  This report was particularly important because a strong result would have cast doubt on several speeches from members of the Federal Reserve.  Those speeches have warned about slower economic growth in 2019 and the potential for fewer rate hikes than previously anticipated.  

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Mortgage Rates Are On a Tear!
Thu, 06 Dec 2018 21:19:00 GMT -

Mortgage rates dropped significantly yet again today, adding to an already impressive week of improvement and bringing most lenders into their best territory since September 13th, 2018.  The average lender improved by more than an eighth of a percentage point in just the past 3 business days and by nearly 3/8ths of a point from the highs seen in early November.  This comes out to roughly $70/month for a $300k loan, or an upfront savings of $4500 if you were to buy your rate down (paying points) back in early November.

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Mortgage Rates Deeper into 2 Month Lows as Stocks Swoon
Tue, 04 Dec 2018 22:16:00 GMT -

Mortgage rates technically hit their lowest levels in exactly 2 months yesterday.  Today merely takes them deeper into that territory.  The size of the improvement is less impressive and less meaningful compared to that "lowest in more than 2 months" talking point.   That said, taken in conjunction with the last 4 business days, the average lender is roughly an eighth of a percentage point lower.  That comes out to $7/mo for every $100k financed (or $21/mo on a $300k loan).

On a somewhat frustrating note, mortgage rates didn't experience nearly as big of a move as the broader bond market.  For instance, 10yr Treasuries--the most widely-used benchmark for longer-term interest rates) dropped 0.05% today.  Mortgages only managed to drop by 0.02% in terms of effective rates. 

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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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