Mortgage Rate Watch

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

Mortgage Rates Continue Defying Bond Market Weakness
Wed, 02 Dec 2020 21:19:00 GMT -

Although it was the focus of yesterday's discussion, the ability of the mortgage market to hold steady in the face of bond market weakness continues to impress.  This is interesting because mortgage rates take direct cues from the bond market.  That's still the case, but at the moment, the mortgage side of the bond market is playing with a stacked deck.  If Treasuries are only a little bit weaker on any given day (like today), mortgage bonds and mortgage rates have been consistently holding their ground or actually improving.  

Today was more of a "ground-holding" sort of day, but it depends on how any given lender responded to yesterday's bond market weakness.  Those who adjusted rates higher yesterday were generally in slightly better shape today.  Those who abstained yesterday were offering slightly higher rates today.  

Regardless of the movement, the average lender remains very close to all-time lows and well under 3% for most top tier conventional scenarios.  Purchases offer the best rates, followed by no-cash-out refis.  Adding a cash-out option takes the average rate closer to 3%, but it takes additional risk factors like non-owner occupancy, lower FICO, or lower equity to see quotes over 3%.  

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Mortgage Rates Surprisingly Steady Despite Market Drama
Tue, 01 Dec 2020 21:05:00 GMT -

Like many industries, housing finance has a superficial layer that's fairly easy to understand for the average consumer.  A person wants a home.  They don't want to pay cash.  They get a loan.  Lower rates = lower payments.  The end.

Shortly below that superficial layer of understanding, where a surprisingly high percentage of mortgage professionals operate, it's popular to discuss 10yr Treasury yields as a basis for mortgage rates.  The only problem with viewing 10yr yields as the basis for mortgage rates is that they're not.

Anyone can observe this objective fact by jumping just a bit deeper into the rabbit hole and acquainting themselves with MBS (mortgage-backed securities).  These are the true raw ingredients for mortgage rates even though they frequently mimic 10yr Treasury yield movement.

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Mortgage Rates Hold Steady Over Holiday Weekend
Mon, 30 Nov 2020 21:43:00 GMT -

Although many mortgage lenders were technically open for business last Friday, it's a well-known unofficial holiday.  Mortgage rate movement requires bond market movement, and the post-Thanksgiving Friday invariably sees fewer traders trading fewer bonds.  Even when bonds do manage to move, the people in charge of setting mortgage rates at various lending institutions tend to play it safe.  In fact, many lenders simply leave rates wherever they were on Wednesday and then simply plan on getting back to work on Monday.

This particular Monday, however, the average lender is still in line with Friday's and Wednesday's rates.  Some of them offered lower rates in response to strength in the bond market today.  Those who abstained are expected to offer token improvements tomorrow, assuming the bond market shows up tomorrow morning in roughly the same shape it is right now.

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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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