CNNMoney.com
Mortgage rates lower for seventh time in eight weeks
Thursday September 14, 7:01 pm ET
Mortgage rates fell for the seventh time in eight weeks after a small gain last week, said a survey released Thursday.
The 30-year fixed-rate mortgage (FRM) averaged 6.43 percent for the week ending Sept. 14, down from 6.47 percent, according to Freddie Mac's Primary Mortgage Market Survey. A year ago, the 30-year FRM averaged 5.74 percent.
The 15-year FRM averaged 6.11 percent this week, down from 6.16 percent last week. A year ago, it averaged 5.32 percent.
Five-year adjustable-rate mortgages (ARMs) came in at 6.10 percent this week, down from 6.14 percent last week. A year ago, they averaged 4.46 percent.
One-year ARMs averaged 5.60 percent, down from 5.63 percent last week. A year ago, the one-year ARM averaged 4.46 percent.
"Although 30-year mortgage rates are about three-fourths of a percentage point higher than they were last year, it's good to keep in mind that rates have dropped from the high of 6.80 percent reached just eight weeks ago," said Frank Nothaft, Freddie Mac vice president and chief economist, in a statement.
"And with short-term interest rate increases seemingly on hold, for a while at least, interest rates overall should not experience any big shifts in either direction."
"The risk to our forecast of relatively stable mortgage rates is that inflation will unexpectedly heat up, causing bond markets to raise their expectations that the Fed will intervene by raising short-term rates. In that case, mortgage rates will again start to rise," he added.
Freddie Mac competes on the secondary market with Citigroup Inc., Countrywide Financial Corp. and Fannie Mae.
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Tuesday, September 19, 2006
Monday, September 11, 2006
Financing home improvements in retirement
Monday September 11, 6:00 am ET
Don Taylor
Dear Dr. Don,
I'm 64 and need $75,000 for home upgrades. I have $300,000 plus in home equity. Would it be best to refinance with an interest-only loan to keep payments down, and then possibly get a reverse mortgage or use IRA monies and pay the taxes on that distribution?
-- Larry Leverage
Dear Larry,
Thanks for providing some additional information about your financial situation to me so I might better answer your question. You told me you are married, retired, have an annual income of about $45,000 per year and have excellent credit. You also told me that your home is worth about $550,000, and there is about $200,000 in outstanding mortgage debt on the home. You have about $150,000 in retirement accounts and no investments in taxable (nonretirement) accounts.
Lending limits on the two main reverse mortgage programs, HECM, or Home Equity Conversion Mortgage, and Fannie Mae Home Keeper, won't let you get a $275,000 reverse mortgage. That's because the first step in getting a reverse mortgage is to pay off any existing mortgages with the proceeds from the reverse mortgage. Put in your particulars using the reverse mortgage calculator at reversemortgage.org and you'll see the problem in black and white. Besides, it's an expensive way to tap the equity in your home, and I'd like to see you hold that option open for future use. A Bankrate feature, "Reverse mortgages: Retirement's on the house," explains reverse mortgages in greater depth.
I like the idea of using a home equity line of credit, or HELOC, even though, since it's a variable-rate loan, you are taking on the risk that short-term interest rates continue to head higher.
The two reasons why I like the HELOC are: The payments are interest-only in the early years of the loan, and closing costs are minimal. The downside is the national average interest rate on a HELOC is currently 8.21 percent.
A cash-out first mortgage can also make sense if the rate is competitive with the rate on your existing mortgage. The national average for a 30-year fixed-rate mortgage is currently 6.49 percent. Saving 1.72 percent versus the HELOC rate can justify paying the higher closing costs. Although it's not interest-only, the extended loan term on the $275,000 loan balance should make the payments affordable. Try the Mortgage Professor's cash out refinancing calculator to see which of these two options makes sense.
Since I can't give you tax advice, you should ask your accountant whether it makes sense to draw down money from your IRA now to reduce the loan needed for home improvements or to pay down the principal balance on the mortgage(s), or wait until you are required to take distributions in your early 70's. My guess is that it makes sense to wait, but you don't want to guesstimate this decision. For financial flexibility, if you can afford the monthly payments on the mortgage(s), it makes more sense to keep the IRA money invested.
Monday September 11, 6:00 am ET
Don Taylor
Dear Dr. Don,
I'm 64 and need $75,000 for home upgrades. I have $300,000 plus in home equity. Would it be best to refinance with an interest-only loan to keep payments down, and then possibly get a reverse mortgage or use IRA monies and pay the taxes on that distribution?
-- Larry Leverage
Dear Larry,
Thanks for providing some additional information about your financial situation to me so I might better answer your question. You told me you are married, retired, have an annual income of about $45,000 per year and have excellent credit. You also told me that your home is worth about $550,000, and there is about $200,000 in outstanding mortgage debt on the home. You have about $150,000 in retirement accounts and no investments in taxable (nonretirement) accounts.
Lending limits on the two main reverse mortgage programs, HECM, or Home Equity Conversion Mortgage, and Fannie Mae Home Keeper, won't let you get a $275,000 reverse mortgage. That's because the first step in getting a reverse mortgage is to pay off any existing mortgages with the proceeds from the reverse mortgage. Put in your particulars using the reverse mortgage calculator at reversemortgage.org and you'll see the problem in black and white. Besides, it's an expensive way to tap the equity in your home, and I'd like to see you hold that option open for future use. A Bankrate feature, "Reverse mortgages: Retirement's on the house," explains reverse mortgages in greater depth.
I like the idea of using a home equity line of credit, or HELOC, even though, since it's a variable-rate loan, you are taking on the risk that short-term interest rates continue to head higher.
The two reasons why I like the HELOC are: The payments are interest-only in the early years of the loan, and closing costs are minimal. The downside is the national average interest rate on a HELOC is currently 8.21 percent.
A cash-out first mortgage can also make sense if the rate is competitive with the rate on your existing mortgage. The national average for a 30-year fixed-rate mortgage is currently 6.49 percent. Saving 1.72 percent versus the HELOC rate can justify paying the higher closing costs. Although it's not interest-only, the extended loan term on the $275,000 loan balance should make the payments affordable. Try the Mortgage Professor's cash out refinancing calculator to see which of these two options makes sense.
Since I can't give you tax advice, you should ask your accountant whether it makes sense to draw down money from your IRA now to reduce the loan needed for home improvements or to pay down the principal balance on the mortgage(s), or wait until you are required to take distributions in your early 70's. My guess is that it makes sense to wait, but you don't want to guesstimate this decision. For financial flexibility, if you can afford the monthly payments on the mortgage(s), it makes more sense to keep the IRA money invested.
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