Mortgage Q & A

The ten year bond is down, but mortgage rates are up, how is this possible?

This condition in the marketplace is the direct result of mortgage bonds increasingly carrying a lower value with investors. Both the ten year bond and mortgage security bond are investment grade bonds, however investors are demanding a higher return on the mortgage bonds because of the fall out in the housing market. The spread between the two bonds was over 50 basis points last week, the highest it has reached since 1991.

The rapid rise in oil prices and the recent CPI report for the month of January have had a large impact on the quick rise in mortgage rates. The concern is that rising inflation diminishes the return on the initial investment for the bond holder, making mortgage bonds less attractive, thus causing rates to move up.

What is a stream line refinance?

A stream line refinance is when your lender agrees to refinance your existing mortgage loan and generally waive most of the third party closing fees such as appraisal, title work, etc. Some lenders who service their own loans can offer a streamline refinance to help make refinancing your loan more appealing, but it is always a good idea to compare their offer against the market to ensure you receive the overall best loan terms.

What does the term rescission mean?

The term rescission or right to cancel is a term used in mortgage refinance transaction. If a borrower chooses to refinance their primary residence, they have the right to cancel this transaction for up to 3 days after they close. This is commonly referred to as a cooling off period.

The stock market appears to be surging, how will that affect mortgage rates?

Mortgage rates have dropped to their lowest levels in the past 12 months. Generally if money is taken out of the bond market and invested in the equity market, interest rates tend to move up.

How do you get your lender to drop PMI?

Lenders MUST drop your PMI once your loan's LTV has fallen below 78% of the original purchase price/appraised value(whichever is lower). Lenders do not assume that your home has increased in value. If you want to have your home appraised to find out if you have reached the twenty percent equity requirement you should contact your lender to find out their specific procedure for having this done

How do I determine what rate I will be at when my arm adjusts later this year?

First you will want to find the document called your mortgage note from when you closed on your present mortgage. this document will tell you what your margin (the amount you add to the index is). You should then find the appropriate index (libor, fed funds, cofi) and refer to a newspaper such as the wall street journal for the latest rates on the indexes. By adding the two items together you should get a good estimate of where your rate will adjust to.

What does the FED have to do with mortgage interest rates?

The FED's responsibility is with monetary policy. The FED is in place to set the FED funds rate or Prime Rate of which banks borrow money from the Federal reserve. They do not directly affect mortgage rates, however there a significant influence on the economy and market when they review the monetary policy, discuss or make changes to the FED funds rate, which can greatly change interest rates.

I am 73 years old, will I be able to qualify to refinance on a thirty year mortgage?

Yes, mortgage lenders are not allowed to factor in your age for qualifying purposes. This is illegal and considered discrimination.

I refinanced 4 years ago into a 15 year mortgage, but now I struggle with the house payment. Is it a good idea to refinance, even though I only have 11 years remaining on my mortgage?

You should review your entire financial plan with an advisor. If you are struggling with your present bills, refinancing may be your only option so you avoid increasing credit card debt or damaging your credit.

I have heard there are 5 year adjustable mortgages, what does this mean?

This generally would refer to a loan that has a 30 year term, and a fixed rate for the first 5 years, after which it would adjust.