Mortgage Rate News

Even as Congress continues to wrangle over the $700 billion bailout plan with the White House, mortgage interest rates are already being affected. While the details have yet to be worked out, it is very clear that sometime in the next two weeks to six months a very large amount of money is going to be entering the market. And this causes inflation.

This inflationary reality is explained by Behind the Mortgage:

In borrowing more, the government is (in effect) expanding the money supply; either by literally putting more dollars in circulation, or by creating a perception in world markets that they will, or will have to, in order to repay the debt.

And expanding the supply of dollars is inflationary - More dollars floating around means the dollars the Federal government uses to pay back these debts will be worth less (For evidence of this in action: Just yesterday the dollar recorded its largest ever one day drop.)

This is something that is important to remember, because mortgage interest rates are connected to long term (usually 10 year) Treasury notes. So as government debt, inflation and the money market makes the dollar worth less, investors *need* more greenbacks to recover their return and beat the rate of inflation. The Mortgage Reports Blog connects the dots to what this means for mortgage loan rates:

And lastly, the mortgage market got hit.   Because mortgage bonds are repaid in U.S. dollars, the value of those repayments dropped.  This forced mortgage rates higher because the only way to entice investors to buy devalued mortgage-backed bonds is to offer them with a higher interest rate.

If you’re wondering why conforming mortgage rates are up by 0.750 percent since last week, this is it — it’s because mortgage rates are responding to the expectations of a weaker dollar going forward.  This is the reverse of what happened in August.

So, even though many expect lending standards to loosen up a bit in the coming weeks, it still doesn’t equal a slam-dunk for the consumer. Because now borrowers will be able to get the home mortgage loan, but they will be paying more for it.

Now could be a good time to refinance into a second home mortgage — if you have the credit and the equity to do so. Why? Because a couple of things are happening that may make home equity loans a little more desirable:

1. The Fed could lower interest rates today.
2. The Fed has just injected liquidity into the market.

Of course, even if the Fed does not lower interest rates today, the rates are still fairly low for a second home mortgage. And if you can lock in a lower rate, you could save thousands on your home mortgage loan. Also, thanks to the liquidity in the market, there is a very real possibility that banks will be more willing to lend to you.

However, it is not just that simple. Banks are still wary, and you will need good credit and plenty of equity in order to refinance. No one is sure whether the housing market has reached bottom yet, and many mortgage lenders are still reluctant to lend money on a home that could go upside down.

If you do decide to try and refinance with a second home mortgage right now, here are some things to consider:

• Only refinance the amount of the loan you have left. It may not be a good time for a cash out home equity loan.
• If you can handle the payments, consider a shorter loan term than 30 years. Refinance for 20 years or even 15 years.
• Try a local bank. Such institutions may be more willing to work with you than the big banks.
• Shop around. Make sure that you look for the best deal. Mortgage lenders should be fighting for quality business right now.

Things are looking interesting on a variety of financial fronts right now. If a refinance will help your situation, it may be just the time to take care of it.

Tags: home equity loan, home equity, home mortgage loan, home equity second mortgage,
second mortgage, interest rate decision, refinance

One of the ways you can save money on your home mortgage loan is to make a biweekly mortgage payment, rather than one that is monthly. This actually reduces your principal, reduces the amount you pay in interest over the life of the mortgage and reduces the amount of time you are paying your mortgage. The reason this works is because you pay every two weeks, rather than just once a month.

Consider this: I have a $1350 a month mortgage. Every year, on a monthly plan, I pay 12 x 1350 = $16,200. But what if I paid every two weeks? There are 52 weeks in a year, so I would make 26 (52/2) payments a year of $675. That is $17,550 paid every year. It amounts to an extra mortgage payment every year. According to this biweekly mortgage calculator, I would have my mortgage paid off in 24.3 years, rather than 30.

But remember: Your savings could be significantly reduced if your home mortgage loan comes with prepayment penalties. So keep that in mind.

BiSaver mortgage payment program

Now there is a program that is designed to make these bi-weekly mortgage payments for you. It is called BiSaver. However, there are fees attached to the program. Here is what My Money Blog says about this mortgage payment program:

After some research, I found out that “BiSaver” is simply a third-party company that goes around pitching this system to mortgage holders like it is some sort of secret sauce. But really they just accept the payments, and then forward them on to the lender. While it purports to “pay for itself in interest savings” almost instantly, it also neglects to mention that anyone can do this for free.

So, really, you could check with your mortgage lender. While some lenders won’t accept these payments (they want all the interest they can get), there are pleny who do. Before you commit to a mortgage payment program, first check with your mortgage lender to see what options are offered.

Tags: mortgage payment, mortgage payment program, home mortgage loan, bi-weekly mortgage payment,
BiSaver, mortgage lender, mortgage loan blog