What about mortgage rates....Are they at the bottom?

Bear · February 23, 2009 8:40AM

I ask because if PMs go up and inflation goes up

how much longer do we have at current mortgage

rates?

cohodk · February 23, 2009 8:44AM

If mortgage and interest rates do go higher you can kiss any economic recovery good-bye.

57loaded · February 23, 2009 8:47AM

the rates are at least bouncing the bottom.

roadrunner · February 23, 2009 8:50AM

Rates may be near a bottom but unfortunately the decline in home prices is anything but steady. Besides a great mortgage rate also to remember to factor in a continuing 5-10%/yr decline in home prices, plus 5%+ per year in property taxes, insurance, maintenance, etc.

roadrunner

rgCoinGuy · February 23, 2009 9:57AM

Another thing to not rule out, the government coming in with a mortgage rate rescue at 4% or below. They do call the shots at Fannie and Freddie.

pf70collector · February 23, 2009 12:24PM

I will be refinancing at 4%/30year for some breathing room but can't complain now mine is at 4.875%/15year since 2005.

guitarwes · February 24, 2009 2:18AM

<< I will be refinancing at 4%/30year for some breathing room but can't complain now mine is at 4.875%/15year since 2005. >>

Me too. My bank is sitting on ready, and when the hit 4% for 30, I'm going to pull the trigger. They were 4.3% 4 weeks ago.

-wes

jmski52 · February 24, 2009 2:21AM

Listening to Bernake speak this morning, I get the feeling that mortgage rates, and fed funds rates will remain low for the forseeable future.

Anyone feel like spending a wad? I don't.

dac076 · February 24, 2009 2:34AM

<< I will be refinancing at 4%/30year for some breathing room but can't complain now mine is at 4.875%/15year since 2005. >>

I'm in a similar boat and I've been kicking this around for awhile. I have 9 yrs left on a 15 year at 5.25%. No problem cash flowing it now, but new mortgage loans are getting pretty cheap. It might not be a bad idea to take out a new 20-year or so in the 4.5% range. It would free up some cash flow to put elsewhere, plus it would drop the payment which is not a bad insurance policy in an iffy economy. Of course the downside is more interest paid in the long run due to extending the term.

cohodk · February 24, 2009 4:45AM

<< Listening to Bernake speak this morning, I get the feeling that mortgage rates, and fed funds rates will remain low for the forseeable future.

Anyone feel like spending a wad? I don't. >>

Rates do not appear to be in any hurry to go higher..

Musky1011 · February 24, 2009 6:16AM

I have 9 years left on 15 year 5.5%

$58,000 to go

Trying to pay off by Christmas this year

Then it's wealth Building time

According to Dave Ramsey

18 years till retirement

fastrudy · February 24, 2009 7:47AM

I have two mortgages and I am retired. I would never want to pay off my mortgages and live in a house that is 'debt-free'. It is an archaic goal and does not make too much sense, given the tax structure in America. Furthermore, when you start tapping into your 401k plans, you will want that mortgage interest to offset your deductions from that account. If somebody would write me a 100 year mortgage, I would take it!

OK, blast away!

Musky1011 · February 24, 2009 8:31AM

<< I have two mortgages and I am retired. I would never want to pay off my mortgages and live in a house that is 'debt-free'. It is an archaic goal and does not make too much sense, given the tax structure in America. Furthermore, when you start tapping into your 401k plans, you will want that mortgage interest to offset your deductions from that account. If somebody would write me a 100 year mortgage, I would take it!

OK, blast away! >>

You will find out the disadvantages of having a mortgage when you are living in a cardboard box under a brdige somewhere

renman95 · February 24, 2009 9:04AM

<< Another thing to not rule out, the government coming in with a mortgage rate rescue at 4% or below. They do call the shots at Fannie and Freddie. >>

Yes, but I think those mortgages are reserved for people that are....as Rick Santelli calls them....LOSERS!! Us responsible people get the LOSER rate plus 1%.

Bear · February 24, 2009 10:13AM

Providing lower cost loans to non losers would free up monthly

surpluses to be spent and rebuild the economy. It would be

shortsighted to benefit just those on or below the edge of survival.

dac076 · February 25, 2009 2:36AM

<< I have 9 years left on 15 year 5.5%

$58,000 to go

Trying to pay off by Christmas this year

Then it's wealth Building time

According to Dave Ramsey

18 years till retirement >>

I like Dave too, but the question in my mind is, does it make sense to have a bunch of $ tied up in "home equity" which as we've seen can disappear at any time. Or would it make more sense to save it someplace liquid, that long term might do better than 5%?

secondrepublic · February 25, 2009 3:17AM

<< I have two mortgages and I am retired. I would never want to pay off my mortgages and live in a house that is 'debt-free'. It is an archaic goal and does not make too much sense, given the tax structure in America. Furthermore, when you start tapping into your 401k plans, you will want that mortgage interest to offset your deductions from that account. If somebody would write me a 100 year mortgage, I would take it!

OK, blast away! >>

The banks must love you. You end up paying several times the amount you borrowed.

First thing to recognize is that mortgage interest is a deduction. Not a tax credit. So if you pay $15,000 in mortgage interest, and are in the 25% tax bracket, you theoretically save $3,750. You're still paying the bank $15,000 for the privilege of saving one-fourth of that amount in taxes.

The reason I said you "theoretically" save that amount is that the "standard deduction" for married couples is about $10,000. You can either "itemize" your tax deductions (adding up mortgage interest, property taxes, charitable giving, state + local income taxes, etc.) or take the standard deducution. You would only itemize if the total of your deductions (the ones I listed) exceeds the standard deduction. The large majority of Americans don't itemize.

At the other end of the spectrum, if your income is too high (in the AMT range), you cannot use all of your itemized deductions. They get cut down for people who make $160,000 or more. Link.

Maybe you itemized, but consider what the real cost of the savings is. If all your itemized deductions (including the $15,000 in mortgage interest) add up to $20,000, the real amount of tax deduction you got from keeping the mortgage is $10,000 (because you would've gotten the other $10,000 as a standard deduction anyway). That means in the 25% bracket, you paid $15,000 in interest to the bank for a tax savings of $2,500.

Generally, the mortgage interest benefit is NOT a reason to keep your mortgage.

I tend to find that the people who think it's a great benefit, generally don't do their own taxes and don't understand the various tax concepts (itemizing, deduction, credit, standard deduction, etc.). Not saying you're one of those, but others I've spoken with are. The tax benefit of mortgages has become kind of an urban legend which, when you examine it, is really overrated.

secondrepublic · February 25, 2009 3:27AM

<< 

I like Dave too, but the question in my mind is, does it make sense to have a bunch of $ tied up in "home equity" which as we've seen can disappear at any time. Or would it make more sense to save it someplace liquid, that long term might do better than 5%? >>

If you can get a guaranteed rate of return higher than your mortgage, go for it. Otherwise, you are probably better getting the 100% guaranteed rate of return that comes when you pay it off and save the interest you would've otherwise had to pay.

I would assume the bank (or its investors) wasn't stupid when it made the loan. If they thought they could have gotten a higher rate of return from an equally-safe investment, they would have done so and wouldn't have loaned you the money.

You can't really compare a rate of return that "might" come in (or which might be negative or even go to zero) with a guaranteed rate of return you get from paying off your own debt.

dbcoin · February 25, 2009 5:33AM

well said second

The AMT for me, takes away any incentive to hold a mortgage

fishcooker · February 28, 2009 12:06AM

Yeah, our realtor stopped in his tracks when I brought up the Standard Deduction. That pretty much torpedo'd the "it's a great deduction" talk.

We're happy to be at the point where we double-up itemized deductions into every other year, and collect the Standard Deduction in the off years. For homeowners in our neighborhood, it's extremely difficult to beat the tax advantages of that.

adamlaneus · February 28, 2009 2:22AM

I, too, am waiting to refinance into a low interest loan. My 5/1 is now in the adjustment-every-year portion. But the interest rate is very low, so i'm patient.

The biggest benefit by far?

It's my house. I keep it in excellent shape. No

landlord. In terms of quality..."it's not a rental".

And, although I am in California and started out with a Jumbo...i'm 'conforming' now with perfect credit, so I will be able to demand the lowest interest rate.

Only six years into the mortgage and most of my coworkers who rent are paying more than my PITI.

As far as refinancing goes, one gets to pull the trigger only once unless one likes to

money away.
I figure i'll refinance at some point this year. Some time soon.

MrEureka · February 28, 2009 8:27AM

Related question:

Are jumbo rates higher only because the government subsidizes smaller loans? Or is there another factor at play?

renman95 · February 28, 2009 11:39AM

What's the point? Dear Leader will want my house soon for the good of the "state". And I agree. I have been too successful and it is not fair to have so much. I want to help lady who can't pay for mortgage or gas in car.

Now, tell me where line is for Soylent Green.

Cr. Renski

derryb · February 28, 2009 12:31PM

If they're going up it sure is not because of demand.

Bear · February 28, 2009 2:42PM

OK, everyone that weighs over 250 pounds,

will have 30 days to finish up your affairs and

report to your local Soylent Green processing

plant.

adamlaneus · February 28, 2009 3:46PM

<< Related question:

Are jumbo rates higher only because the government subsidizes smaller loans? Or is there another factor at play? >>

This is a simplistic view, lots of complex stuff (as well as media propaganda and politics) going on here:

Fannie Mae and Freddie Mac, those cute little names we have come to know...they do not buy loans over $417,000.

That means that the available cash for Jumbo loans is smaller than for Conforming.

With more folks competing over less money...that gives you higher interest rates. The goods go to the highest bidder.

There is also a perception that Jumbo loans are riskier. However, I do not buy that argument.

There is pressure to raise this limit, especially from groups such as Realtors who want to see more, and higher priced houses sell.

But the limit helps out most folks, as it keeps interest rates for most folks low. It's sort of a 'progressive' interest rate where the folks that can afford more...pay more.

What about mortgage rates....Are they at the bottom?

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