Mortgage Rate Watch

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

Mortgage Rates Surge to New Long-Term Lows After Fed
Wed, 20 Mar 2019 21:30:00 GMT -

Mortgage rates broke a week-long streak of silence today following a policy announcement from the Federal Reserve.  Even before today's Fed announcement, we knew we'd likely be seeing a move in rates.  We just didn't know in which direction, or at what pace.  As it happens, we were treated to the best case scenario on both accounts (i.e. rates moved lower at a fast pace).

As we discussed yesterday, it was the Fed's balance sheet that got most of the attention from financial markets.  This refers to the Fed's loan portfolio consisting of Treasuries and mortgage-backed-bonds (both forms of loans that entitle the Fed to collect interest and principal payments).  As those payments came in, the Fed had previously been putting the money back into new loans (buying new bonds to replace the old ones).  They began to decrease those reinvestments in 2018.  This was/is referred to as "balance sheet runoff" because it makes the balance sheet smaller.

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Rates Unchanged for 4th Straight Day. That Should Change Tomorrow
Tue, 19 Mar 2019 19:48:00 GMT -

Mortgage rates were flat for the 4th day in a row today in a sign that investors have largely taken their seats for tomorrow's big show.  The Fed will release its new policy statement at 2pm tomorrow, and while they're not expected to hike rates this time around, there are other important considerations that could have a big impact on rates.

One of the considerations is the fact that March is one of the months where the Fed updates its economic projections.  Investors largely tune-in to these for a glimpse at the collective rate hike outlook.  This has caused big market movement in the past, but something else could be even more important tomorrow.

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Mortgage Rates Hold 14-Month Lows
Mon, 18 Mar 2019 20:30:00 GMT -

Mortgage rates didn't budge today--a logical result with no signs of life in underlying bond markets.  In the current case, this is just fine with us considering the bond market has gone silent while remaining at the best levels in 14 months.  Specifically, mortgage-backed-securities (MBS, the most important ingredient in determining mortgage rates) are at 14 month highs.  When MBS are higher, rates are lower (14-month lows in this case).  10yr Treasury yields, on the other hand, spent a few hours at stronger levels on January 3rd, 2019.

The only reason I bring up the modest discrepancy between Treasuries and MBS is to illustrate a point that we should keep in mind this week.  Treasuries are capable of moving much more quickly than mortgage rates.  That's why Treasuries made it to lower rates in early 2019 whereas MBS didn't have time to react by comparison. 

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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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