Lake Mary Refinances: ARM Rates FALL

SO how are the evil mortgage products doing? Huh, they may actually be better than the fixed products? Maybe they aren’t evil after all… just different.

It is true that some of the wrong people got bad advice from some neophyte mortgage ‘professional’, but the good news is that those folks are back waiting tables.

The interest rate against which adjustable-rate mortgages [ARMs] change is continuing to fall — This could very likely be the evidence we need indicating that the worldwide banking system is starting to stabilize.

On any ARM, the initial “start rate” remains fixed for some period of time [typically 3 – 5 – 7 – or 10 years], and then adjusts according to some pre-determined agreement. It is more a hybrid than it is a pure “ARM”.

For a conforming mortgage, an ARM will typically adjust once per year after that initial locked period, based on this formula:

[index] + [margin] = Adjusted Rate

Where the index is often assigned…

Read the complete blog post here:

Lake Mary Refinances: ARM Rates FALL

The FED rate cut and… okay, I’ll say it… apocalypse

Sooooo, [I thought i would start with something other than ‘okay…’ LOL] The FED made an “emergency rate cut” yesterday, dropping the Fed Funds Rate by one half-percent to 1.500%. What you care about, is the PRIME rate dropped to 4.500%… this is what HELOCs and credit card rates are based on… yeah I know… good news, right? I mean, the move is meant to stimulate the U.S. economy… isn’t it?

When the Federal Reserve changes the Fed Funds Rate, it often takes 9 months for the changes to work their way through the economy so this is not an immediate realization of change, but apparently the FED felt it had to do it and do it quick. Emergency meetings are relatively rare.

On a broad scale, therefore, we won’t know if the cut truly “worked” until thew summer of next year.

But, as it relates to ‘we the people’ in general, the rate cut spurred two instantaneous changes.

1. Credit cards and HELOCs will be more affordable as I stated before,
2. but the second change is that mortgage rates are rising.

The Fed’s moves have sparked optimism in some corners of Wall St. and money is now flowing into the stock market at the expense of bonds… or is it the other way around. My gosh, my head is spinning… and I watch this intently every day. You better sit down.

As always, mortgage markets and mortgage rates remain in turmoil. Therefore, rates are subject to change… uh… a lot… anddddd frequently. Did I mention frequently? If you see a rate and payment you like, be ready to commit to it because it likely won’t last long. Have the nerve to PULL THE TRIGGER!

(Image courtesy: USA Today)

Should you get an Orlando Refinance? Should you tap your assets?

The sure thing that uncertainty seems to bring with it…  more uncertainty.  With uncertainty, comes inaction.  This is good and this is bad.  I guess the proper [in]action is whatever you must do to keep your powder dry. For some people that may mean… do nothing.  For many more, it may mean getting things in order.  For some people, an Orlando refinance is the right move… others may need an Orlando FHA Short Refinance… others might need to consider making “hardship withdrawals” from their 401(k) plans.  Whatever option you choose… get professional advice.  Times of turmoil are times to tighten the belt, but not when it comes to best advice as to how to keep your powder dry. [Heck maybe that should have been the title of this mortgage blog.] LOL

Once FHA Short refinances are a bit more widely accepted among the major mortgage holders it may be a better choice for some, but right now it seems people are turning to their 401(k)s.  In fact, a major fund group cites a 15% up-tick in activity in ‘hardship cases’ from people needing access to some of their 401k funds in order to, among other things, stave off late mortgage payments, bad credit, foreclosure, short sales and medical emergency.

However, 401(k) loans should only be made with careful consideration.  If you need financial advice, I know several top-tier LOCAL Orlando financial advisers that I can introduce you to in order to field questions… simple  or complex.  People like  Jim Hasley, Dan Smith and John Ledford, among others, have all proven their value in such a tumultuous time for those that have come to rely on them.  Bravo, I say!   [Or is it ‘Woo hoo’, that I say?]

On the positive side, 401(k) loans don’t require a credit check like an Orlando cash-out refinance would. This is a helpful little nuance for people deep in debt, and who may have been late on a payment or two to their creditors. With no credit score requirement, a poor payment history won’t disqualify a plan participant.  Would credit repair and a refinance be a better option?  Possibly… but get that advice from the financial planner or the person that you lean on now for financial advice.  I don’t want the fact that I do Orlando Mortgages to be perceived as bias on my advice.  Those that know me, know it would not, but this blog has gained amazing amounts of traffic, so most of you don’t know me yet. =0)  Anyway, back to the 401(k) stuff…

In addition, most 401(k) loans can be arranged with just a phone call and a small stack of paperwork. There’s no “qualification process” like applying for a credit card or jumping into the mortgage qualification process. Money can be available, therefore, in as little as a day.

But there are negatives to 401(k) loans and the biggest one relates to taxation.  Financial planners, like Jim, Dan and John can help with this, or local CPAs like Craig Zokvic or Bob Biferie can be good resources as well.

If you take a 401(k) loan and can’t repay according to its terms, the IRS taxes the loan as ordinary income [oops] and slaps on a 10 percent penalty if you’re under 59 1/2. That can be very costly for a lot of people.

But, even if you do repay the loan on time, it’s still gets expensive. This is because 401(k) loan repayments are subject to double-taxation. [Don’t ask… call a tax professional! LOL]  Well… here is a snap shot of what happens… but still… I am not a tax adviser so check-out what I am saying here:

The first taxation occurs when the loan is repaid because the payback is made with post-tax paycheck dollars. A person in the 25% tax bracket, for example, would need a $1,333 paycheck to repay a $1,000 loan — the missing $333 goes to taxes.

And the second taxation occurs at retirement when the funds are finally withdrawn. The IRS taxes that money as ordinary income. [Jerks!] <——– Okay, when I say that it sounds funny… when you read it, your can’t hear the humor!

Now, this isn’t to say that taking a loan against your 401(k) is bad, it just may not be the best possible route for a person in trouble. Especially because of the costs. If you’re planning to withdraw from your 401(k) for hardship, be sure to talk with one of the qualified financial professionals above first.

If you’d like a referral to a trusted professional, call or email me anytime.

Chris

Tags: keepyou powder dry, orlando refinance, orlando fha short refinance, jim hasley, dan smith, john ledford, craig zokvic, bob biferie, 401k loans, orlando cash out refinance, orlando credit repair, financial hardship, orlando mortgages

Mortgage Market, Stock Market, Unstable… Oh my!

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After the House of Representatives defeated the ‘Emergency Economic Stabilization Bill of 2008’ affectionately known as the$700B Bailout… the stock market fell more in any single day in history.  [You probably have already recognized that the stock market does not favor uncertainty. =0)

The Dow Jones Industrial Average closed down 777.68 points, its largest one-day point loss ever.

Apparently, I am not the only one that remains bullish on America as a whole though, because only 24 hours later… we had the third largest GAIN ever.  I feel like the kid that gets a free pass to stay on the roller coaster over and over and over… only i am starting to feel like I may hurl if I don’t get off soon.  That Chili Blog…uh Dog… and the funnel cake isn’t resting well anymore! LOL

Does this mean, at the end of the day, the experts really don’t know that much  more than you and me?  Makes one think, does it not?

The stock market activity is highly relevant to mortgage rates right now because when investors flee the stock market, they’re often parking their money in bonds.

In general, that causes mortgage rates to fall.

But, as in many things, when folks regain their appetite for funnel cake [read: stocks], as they did Tuesday, they move back into the market, “un-parking” their bond money. This causes mortgage rates to rise… we have talked about this before referring to it as the “Flight to Quality”.

Both Monday’s and Tuesday’s drastic swings points to the speed at which market conditions can change, taking mortgage rates with them. At the end of the day, what does this mean for you… if you find a rate for a home purchase that you like, you may be best served by locking it in.  If  not you may find your hovering over the garbage can near the tilt-a-whirl. =0)

We can’t predict if rates will fall or rise going as we move into the future, but if the stock market is any sort of a clue lately, in whichever direction rates go, they’re going to go there like an amusement park roller-coaster.  [Personally, if I had to choose, I like the Hulk at Universal.]