Bankrate: Mortgage Rates Reverse Course

NEW YORK, Feb. 12 /PRNewswire-FirstCall/ -- Mortgage rates fell sharply from one week ago, with the average 30-year fixed mortgage rate dropping from 5.70 percent to 5.34 percent. According to Bankrate.com's weekly national survey, the average 30-year fixed mortgage has an average of 0.37 discount and origination points.

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The average 15-year fixed rate mortgage sank to 5.03 percent and the average jumbo 30-year fixed rate dipped to 6.98 percent. Adjustable rate mortgages were lower also, with the average 1-year ARM pulling back to 5.67 percent and the 5/1 ARM retreating to 5.37 percent.

Mortgage rates plunged after Treasury Secretary Tim Geithner pledged to reduce mortgage rates through an as-yet-to-be-determined housing initiative in the Financial Stability Plan. Increasing skepticism about the economic and financial outlook helped drive benchmark Treasury yields lower, pulling mortgage rates lower as well. These worries outweighed the predominant investor concern of last week, the volume of government debt issuance.

Mortgage rates have dropped as much as the outside temperatures compared to six months ago. Back in August, the average 30-year fixed mortgage rate was 6.74 percent, meaning a $200,000 loan would have carried a monthly payment of $1,295.87. With the average rate now 5.34 percent, the monthly payment for the same size loan would be $1,115.58, a savings of $180 per month for a homeowner refinancing now.

SURVEY RESULTS
30-year fixed: 5.34% -- down from 5.7% last week (avg. points: 0.37)
15-year fixed: 5.03% -- down from 5.31% last week (avg. points: 0.38)
5/1 ARM: 5.37% -- down from 5.5% last week (avg. points: 0.48)

Bankrate's national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.

For a full analysis of this week's move in mortgage rates, go to http://www.bankrate.com/mortgagerates

The survey is complemented by Bankrate's weekly forward-looking Rate Trend Index, in which a panel of mortgage experts predicts which way the rates are headed over the next 30 to 45 days. This week, half of the panelists predict mortgage rates will decline. Only 14 percent forecast an increase in rates over the next 30 to 45 days, while more than one-third, 36 percent, expect rates to remain more or less unchanged.

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Purchase Reverse Mortgage Offered by MLS Reverse Mortgage

As a way to help seniors looking to either downsize their homes or purchase a new home, MLS Reverse Mortgage has begun offering reverse mortgages for home purchase. Now seniors can purchase a home with no monthly payments.

Auburn, CA (PRWEB) February 20, 2009 -- On January 1, 2009, HUD/FHA began insuring reverse mortgages used to purchase homes. In the past, reverse mortgages have only been available as a refinance loan to seniors who already resided in the home.

This is fantastic news for senior homeowners aged 62 and older. But, what does it really mean to seniors? Well, it gives seniors the opportunity to purchase a new home without monthly payments. Reverse mortgages do not have credit or income requirements, therefore, this will make buying a home for first time buyers, seniors looking to downsize from their existing homes or those seniors needing special requirements like wider hallways, much easier to obtain. Reverse mortgages are based on appraised value and Borrowers age. As a rule of thumb, the older you are, the more you qualify for.

"I'm ecstatic to be able to offer the reverse mortgage for home purchase," stated Mike Borba, President of Borba Investments, Inc. dba MLS Reverse Mortgage. "I feel it's truly a needed product and will help hundreds of seniors more comfortably age in place."

For those interested in the purchase reverse mortgage, a quick phone call to MLS Reverse Mortgage will answer a lot of burning questions. For example, how much money will I need as a down payment? Also, if you know how much money you have available for down payment, MLS Reverse Mortgage can let you know the purchase price range of homes that you should be looking for.

Example 1: A 65-year-old borrower who purchases a $300,000 house would need about $125,000 to put into the transaction as a down payment and towards closing costs. *

Example 2: A 65-year-old borrower has $65,000 to use as a down payment and towards closing costs. She/He would qualify to purchase a home valued around $144,000. *

Reverse Mortgages have seen a major jump in popularity over the past few years. But, what is a Reverse Mortgage? A majority of senior homeowners would like to stay in their own homes throughout their retirement years. However, everything from rising healthcare costs to increasing home maintenance expenses are making that more and more difficult. As a response to the apparent problem, the U.S. government created a financial solution for homeowners 62 and older. The solution is called a Reverse Mortgage and it may just help seniors truly enjoy their retirement years. A reverse mortgage enables homeowners 62 or older to convert part of the equity in their homes into tax-free income without having to sell their home, give up title, or take on a new monthly mortgage payment. And now, seniors have the option to use a reverse mortgage to purchase a new home.

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Reverse mortgage pays you - for life: But high costs require caution

If you're at retirement age and worried about how you'll pay the bills after the bear market devoured a chunk of your nest egg, you may be sitting on the solution: your home.

With a loan called a reverse mortgage, homeowners who are at least 62 years old can tap the equity in their homes to provide monthly income for life.

"Reverse mortgages can provide a lot of people with peace of mind, because even when the market is down, you can secure lifetime income," said Tony Garcia, president of LibertyStreet Financial Group, a reverse mortgage lender based in Carlsbad, Calif.

The catch: Reverse mortgages have high up-front fees, so they make sense only for people who plan to stay in their homes for a long time.

Here's a rundown on what a reverse mortgage is and how you can know whether it makes sense for you:



What's a reverse mortgage?

With a normal mortgage, you borrow a set amount and then pay the lender back, with interest, over time.

With a reverse mortgage, you also borrow a portion of your home equity, either as a lump sum or in the form of monthly payments that are guaranteed to last for your lifetime. Some or all of the loan can be made through a line of credit that you draw down when you need the money.

The money borrowed under a reverse mortgage doesn't have to be paid back until either you move out of the home or you die. In the meantime, the interest that accrues is added to the loan amount. The loan, including interest and fees, is typically paid off from the proceeds of the sale of the property. Anything left over goes to you or your heirs.



What does it cost?

Plenty. Under reverse mortgages insured by the federal government, you pay an up-front insurance premium equal to 2 percent of your home's value (up to $417,000) and origination fees of as much as 2 percent of the property's value.

In addition, you pay regular mortgage closing costs for such things as appraisals and title insurance, which can run $2,000 to $3,000 for an average loan. If your home is appraised at, say, $400,000, you would pay about $17,000 at closing. You also are responsible for $30 to $35 in monthly service fees.

On the bright side, you don't have to pay the fees in cash. They're generally added to the loan balance. But the fees do reduce the amount of cash you can get when you take out the reverse mortgage.

How much cash can I get on a reverse mortgage?

The amount you can borrow depends, obviously, on the value of your home but also on a variety of other factors, including the interest rate on the loan and your age.

Why does my age matter?

Because the lender assumes it won't get paid back until you die - and because the loan balance grows until it is paid off - the amount that can be tapped is based on your life expectancy. A current rule of thumb is to subtract 10 from your age and figure that's the percentage of your home's value that you could get based on these actuarial limits, if your home is worth $417,000 or less. The exact amount, however, depends on prevailing interest rates. The lower your interest rate, the more you can borrow.



What if my house is worth more than $417,000?

In that case, the amount you can borrow is calculated using $417,000 as the property value. For example, if you're 75 and your home is appraised at $1 million, the rule of thumb says you could get 65 percent of $417,000, or about $270,000.



That doesn't sound like much for an expensive house.

True. But it's worth noting the $417,000 is higher than previous home-value limits, and lawmakers are considering a proposal to boost it to $625,500. If enacted, the measure would allow a 75-year-old owner of a $1-million home to tap $407,000 in equity (65 percent of $625,500).



If I get a reverse mortgage, does the lender get my home when I die?

No. The lender just wants to be paid. This can be done with the proceeds from selling the home. If your heirs want to keep the home, they would have to pay off the loan - or buy the home from your estate, allowing the estate to repay the mortgage.



Can I get a reverse mortgage if I still have a regular mortgage?

Yes. But the existing loan must be repaid with some of the money you borrow under the new loan. So, if you had a $200,000 regular mortgage and, based on your age and home's value, you could borrow $300,000 with a reverse mortgage, you would have only $100,000 in money left after making good on the old mortgage. However, repaying the regular mortgage would improve your cash flow by eliminating your monthly payments on that loan.



Where can I get more information?

AARP's Web site offers a free publication on reverse mortgages and a reverse mortgage calculator. Go to aarp.org/revmort.

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FHA Refinance Specialist Residential Finance Corp. Explains How Obama’s Stimulus Plan May Affect Your Mortgage

American Recovery and Reinvestment Act aims to make it easier for you to refinance your mortgage loan

COLUMBUS, Ohio--(BUSINESS WIRE)--Now that President Barack Obama’s $787 Billion Economic Stimulus Bill has been signed into law and will take effect on March 4, many American homeowners are anxiously wondering how this bill may affect the housing market. Despite primarily focusing on bolstering the economy by creating jobs and reviving spending, the bill includes steps to revitalize this critically important segment of the American economy. But what impact will the stimulus package directly have on your mortgage?

President Obama’s plan, named the American Recovery and Reinvestment Act, is designed to address two groups of homeowners: those who are current on payments but have high interest rates and not enough equity to qualify for refinance, and those who are at risk of losing their homes. The plan also intends to provide $200 billion in additional financial backing to Fannie Mae and Freddie Mac to increase money available for home lending.

These steps will directly help homeowners and new home buyers seeking a new mortgage, says Michael Isaacs, president and CEO of Residential Finance Corporation (www.residentialfinance.com), a nationwide mortgage lender specializing in FHA refinances. “The stimulus package aims to make money more readily available for lenders to help those who are currently in need," says Isaacs. "The American Recovery and Reinvestment Act will directly help those seeking to refinance out of bad mortgages as well as those looking to become homeowners for the first time."

The American Recovery and Reinvestment Act offers the following provisions:

FHA Loan Limits – FHA loan amount limits will be raised to $729,750 for homes in high-cost areas. Areas with higher-valued homes will enjoy the many benefits of an FHA loan, such as low rates and easier qualification standards. The bill reinstates 2008 FHA loan limits, with a maximum cap of $729,750. The bill also provides the option, if warranted, to increase loan limits for any “sub-area”, i.e.an area smaller than a county. These limits will expire December 31, 2009.

Home Ownership Tax Credit – A non-refundable tax credit of up to $8,000 will be available for buyers who purchase a home this year--before December 1, 2009--and who have not bought a house in the previous 3 years. This tax credit amount is based on 10-percent of the home’s purchase price, up to $8,000. To qualify, homeowners must keep their home for at least 3 years.

Simplified Refinancing – Borrowers with less than a 20-percent equity stake in a traditional loan guaranteed by Fannie Mae or Freddie Mac (commonly referred to as “conforming” loans) may now refinance to up to 95-percent of their home’s market value without purchasing private mortgage insurance, which typically can increase monthly payments by hundreds of dollars.

Neighborhood Stabilization – $2 billion in additional funding is also made available to create the Neighborhood Stabilization Program (NSP) to address the problems facing whole neighborhoods that are decimated by foreclosures. Funds can be used to purchase, manage, repair and resell foreclosed and abandoned properties. States and localities can also use these funds to establish financing methods for purchasing and redeveloping foreclosed properties.

Reverse Mortgages – Loan limits on Home Equity Conversion Mortgage (HECM) – or “reverse mortgage” loans will rise to $625,500 until the end of 2009. Current limits, which mirror conforming loan limits, will be raised to open up reverse mortgage options for many seniors who may want to rely on home equity as a stable source of income.

Low Income Housing – States will receive financing for construction and rehabilitation of low-income housing.

Rural Housing Programs – 100-percent financing will be made available for rural housing loan programs.

Energy Efficiency Benefits – Tax credits for energy-efficient upgrades will be extended through 2010.

Foreclosure Protection – $75 billion program will be established to subsidize loan modifications for participating lenders to help many homeowners facing foreclosure.

“Rates are still at historically low levels and this is still a great time to refinance,” says Isaacs. “However, there has been much talk that banks and lenders will make it harder for borrowers to qualify for loans for both new and refinanced mortgages, especially for borrowers with less than perfect credit scores. I urge people contemplating a new mortgage or refinancing an existing mortgage loan to move quickly to lock in their best loan rate and options."

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