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Mortage rates drop to an all time low
Topic Started: Dec 17 2008, 11:03 AM (263 Views)
dsconnell
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Just wanted to throw it out there to all the fellow OTB members.. Outside of hunting and fishing I do that part time gig (actually full time gig that pays the bills) as a mortgage banker and just wanted to inform everyone that the 30 year rates are in the 4's right now even with fair or less than great credit..

If you think this might benefit you let me know or shoot me a PM and I would be happy to take a look at it no obligation to see if it makes sense.. If you have anything over a 5.75% on a 30 year it is worth taking a look at!

Unfortunately this is only in the states but I know there are quite a few folks on here fromthe states..
Dan Connell
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Renegade
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These low rates are going to help many. Not only that but the price of gas is back down too. I guess when the DOW dipped to 7,500 that was the bottom. Wish I had money to invest in the market. Let's hope things turn around. There are a lot of people hurting right now. ;)
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3.5% is Prime. It's scary. I have a variable rate so to me it's just fine. However, it does reflect the extent to which our leaders have confidence in our economy.

The US is now at 0% interest.

That means their money has no value. Think about that one.
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2009 is going to be a tough year financially, 2010 will be just as bad, 2011 is the year to borrow as much as you can as the rates will be low to start with and then we will be back to double digit interest rates.

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Someone who looks down on other people and is beyond arrogant
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dsconnell
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dobber
Dec 18 2008, 11:43 AM
2009 is going to be a tough year financially, 2010 will be just as bad, 2011 is the year to borrow as much as you can as the rates will be low to start with and then we will be back to double digit interest rates.

Out of curiosity just curious how you came to this conclusion? Rates are the lowest they have ever been bar none. Do you think that rates will fall below the 4.5% later down the road? If so what makes you think this? If you have a mortgage rate as of now over 5.625% you should be looking at refinancing no questions asked.
Dan Connell
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dsconnell
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billert
Dec 18 2008, 11:08 AM
3.5% is Prime. It's scary. I have a variable rate so to me it's just fine. However, it does reflect the extent to which our leaders have confidence in our economy.

The US is now at 0% interest.

That means their money has no value. Think about that one.

Biller..

Unless you are planning to sell within the next 2 years you may want to call your bank and get that locked in.. Yeah your rate will be a touch higher but you will be locked cause once this starts to go back up what is your exit strategy or game plan? Sure you could refi then but what will rates be? Just saying.. If you aremy brother I am dragging your ars to the bank and making you refi right now. That is just the honest truth...
Dan Connell
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Dinsdale
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I got 5 year fixed @ 4.2% on a 20 year a few (3 1/2) years ago
and 4.88% 5 year fixed last fall when I remortgaged to get rid of some of my GFs Credit cards.


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dsconnell
Dec 18 2008, 09:49 AM
billert
Dec 18 2008, 11:08 AM
3.5% is Prime.  It's scary.  I have a variable rate so to me it's just fine.  However, it does reflect the extent to which our leaders have confidence in our economy. 

The US is now at 0% interest.

That means their money has no value.  Think about that one.

Biller..

Unless you are planning to sell within the next 2 years you may want to call your bank and get that locked in.. Yeah your rate will be a touch higher but you will be locked cause once this starts to go back up what is your exit strategy or game plan? Sure you could refi then but what will rates be? Just saying.. If you aremy brother I am dragging your ars to the bank and making you refi right now. That is just the honest truth...

No worries. I can understand your point and have thought of all of it.

I watch and follow all the news and trends. You can too here, they are bang on as far as predictions as they pool a lot of financial institutions and watch what is happening.

http://www.canadianmortgagetrends.com/

The fact of the matter is that rates are still going down further (which is why I said scary - we may hit 0% too, but probably will stay shy of that). I'm extremely focused on paying down debt right now and the best way to do it is with a variable rate, open. In fact, I only have one account...and it's negative. All my money goes in there and expense come out. What is left is held down against the debt. I am aiming to have it paid down in 5 years which I fully expect rates to stay low for. Historically variable rate holders have faired better than fixed, but not everyone can tolerate the risk. I can. I would be okay if rates doubled to 10% overnight (which they wont). I fully expect, like dobber that rates are going double digits in 2-5 years. Inflation is going to run rampant and the dollar is going to be devalued so interest rates will need to be put in as a check.

I've convinced friends that have a save mentality to switch to VR. These are people with about 100k left to pay and can do it over 2-3 years. Anyone else might not like renewing at 8-10% which is highly likely in 5 years. Buckle up and pay down debt! The debt free will fare much better in instability then others. If you are locked in, making extra payments now will help chew down the principle so when you have to renew your payments will stay the same despite a higher interest rate.

I'm no expert, but I do have a plan ;)



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Renegade
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I doubt you will see double digit interest rates except on certain credit cards...lol. Lower interest rates are a good thing overall. The idea is to stimulate the economy. Real inflation has been really low for a long time now which is also good. The market was in need of a reality check and corporations were in need of some shaking up especially in upper management. Compensation for top executives was and is a little too much, sure I think executives warrant a good paycheck and certainly having some renumeration tied to success is a great motivator but how do you measure success? Who is doing the measuring and what happens when bad decisions are made? There needs to be more checks and balances overall. More accountability in the financial system. I think recent events will help shape a brighter future for us and our children. Everytime in history that industry/society goes through a crises that same society/industry/country usually bounces back all the stronger. Just my opinion.
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Im at 6.6 for another 2.5 years. ill be heading in next week, i only have 10 years remaining and the lower rates would be dandy.
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i'm floating around on a variable and its sweet, if we weren't moving as soon as we get the house ready i'd be locking in for sure. Nice to have more of my payment going to the principal thats for sure.
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smitty
Dec 18 2008, 08:12 PM
Im at 6.6 for another 2.5 years. ill be heading in next week, i only have 10 years remaining and the lower rates would be dandy.

If you're at 6.6 and go with VR at 3.5 you don't have 10, you have 5. Just keep your payments the same with the new low interest rate. Plus interest is almost for sure to going down in the short term.

Why not double digits interest?

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Hard to read...but the text says that over 25 years the average interest rate is 10.4%

The early 80's show interest at 18-21% [for a house!]. My dad remembers paying 18% on his house debt in the 80's.

Rates at 5%, which we are used to are historical lows, not the norm. What would you do if you had to renew at 20%?

Low interest rates caused the bubble. A lot of economists think that fudging with the interest rate is what causes the ebb and flow of markets and cycles. Low credit, lots of buying, increase interest, burst bubble. In this case, the bubble burst because the banks ran out of money and people couldn't service their high debts anymore.
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Renegade
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Hard to read...but the text says that over 25 years the average interest rate is 10.4%


No. One thing I do know is that you can present statistics in many different ways and get different numbers usually the numbers that promote self interest. Anyway, it is near 2009 now and 25 yrs ago was 1984....I would guess interest rates averaged 6-7% over the last 25 yrs. I don't forsee sudden inflation in the next few years and monetary policy leaning toward aggressive interest rate hikes, but hey, who the heck knows for sure. Locking in at 4% is definately not a bad move. I have always used variable rate loans as usually over time they wind up being a better deal than locking in.
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A question via PM, but might help others.


explain how you cut the mortage life (10) in 1/2? also, with the variable rate, what happens if she peeks again, do you have the option to lock in? thanks kindly for the info.[/QUOTE]

To do this I have to make some assumptions. I assume that you started with a 250k house and are 15 years into your payments (with 10 years left) and have reduced your principle in half or thereabouts. Let’s assume you have 110k left in payments. You can run your exact numbers here:

http://www.mortgagecentre.com/index.cfm?pg...FTOKEN=61119808

I use the “Mortgage Payment Calculator”

a) So for 110k at 6.6% over 10 years you have payments of $1249.65/month

b) If you have 110k at 3.5% over 5 years you have payments of $1995.85/month

Thus, in reality I was exaggerating a bit. In actual fact it would cost you an extra $650 a month to cut your mortgage from 10 to 5 years (in addition to 3.5% interest) but will only pay about 10k interest over that time frame.

c) 110k at 3.5% over 8 years is $1314.11. Essentially it shaves off 2 years of payments for about the same outlay.

d) 110k at 3.5% over 6 years is $1694.77 which is about $445 more a month and might be a nice balance if you can find the extra cash. It saves 4 years of payments!

Just play around with the calculator to see what fits best for you.

Interest rates don’t jump up and down all the time, and usually they are predictable. You can usually, depending on the lender, lock in at anytime or else have rates you pick that lock in automatically.

I’m no expert.

____

4% is a great rate, no doubt. If you are comfortable, by all means lock in. Usually it is pretty obvious right away who should have VR mortgage and whom don't suite it. If you aren't tolerant of risk and make a predictable amount of money every month then fixed is great. If your income fluctuates and you make extra money every so often then a VR will let you put more down.

Want to hedge a bet that rates hit 10%? 2-5 years it's coming. But you are right, it's just a guess. No one will know for sure.
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Here is a record of all the rates throughout history. The high rates center around the hard times, 80's 90's...but not the 30's?

http://www.bankofcanada.ca/pdf/annual_page1_page2.pdf
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crisop
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interesting and i can't do a thing until the summer with my mortgage, we've got an even 6% but we are up in october so i'm not doing anything until 6 months before that and were locking in for a nice low rate...hopefully

although we've been in the house for 4 yrs and already have 11 left to pay it off. man tose extra payments and more every bi-weekly sure help alot
winter time with snow and ice means ICE FISHING
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crisop
Dec 21 2008, 09:25 AM
interesting and i can't do a thing until the summer with my mortgage, we've got an even 6% but we are up in october so i'm not doing anything until 6 months before that and were locking in for a nice low rate...hopefully

although we've been in the house for 4 yrs and already have 11 left to pay it off. man tose extra payments and more every bi-weekly sure help alot

You could, but you'd likely pay a small penalty. If you go with the same bank they may wave the fees although their rates might not be that competitive. I always use a broker since they will look at all the rates.

If you are fixed even going weekly helps a huge amount. Then you know the money comes out every week.
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crisop
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we looked at weekly and it didn't make a difference, except for a few bucks and pay it off a month sooner so we stuck with the accelerated bi-weekly

ya when we renew this fall we are deinfatetly looking at a broker this time to get us the best rate we can
winter time with snow and ice means ICE FISHING
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If you use a broker make sure you ask if they can absorb the fees. Not everyone knows but if you discharge your mortgage from most lenders (even if it's the end of the term!) they will charge you a fee...usually around $250. The broker gets a commission from the new lender, and a good one will absorb these fees in order to set you up. If you can't find a good broker, let me know and I can set you up with one I trust. I've known him for 8 years and he set me up with my first mortgage.
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crisop
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no problem i'll let you know billert
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I think you are referring to a transfer fee Billert. Every bank charges a transfer fee and is usually absorbed by the other institution. As for a discharge, a mortgage is not necessarilly discharged on a straight switch from one institution to the next. Unless it is set up as a collateral mortgage with a line of credit affixed to it.

Interest rates are quite low now and we will likely see even lower. How much lower is hard to say as the downward pressures on interest rates will come to a halt once inflation starts to creep in. This could take awhile for our economy to bounce back but it can also happen very quickly. Especially with all the money that the United States is printing these days.

I think the advice as to taking advantage of locking in your rate now is a good one. Doesn't have to be today or tomorrow but certainly it should be on your mind. No one knows where the bottom is and quite frankly it really doesn't matter. What should matter is what rate are YOU comfortable with and lock it in. I personally think any rate below 5% is a good rate especially for 5 years.

When the economy does recover and if it happens too quickly ie. over a 1 year period, we may see rates sky rocket to double digits. The government may be forced to raise rates to try to cool down the economy at some point.

Think back to the 80's where we had high rates. these rates were a result of high inflation and the gov't kept hammering it to try to cool the economy. What they did was learn from this and put measures in place so that they could nip it in the bud so to speak next time around. They did this by nudging interest rates when inflation rose to somewhere around 2.5-3%.

This has worked fine in the last 20+ years but because now that all hell has broke loose, they may be forced to do so again to try and regain control.

Might not happen this way and hopefully our recovery will be slow and steady.

definitely some tough, unpredictable times ahead.

You know your financial situation, if it makes sense (pardon the pun) to lock in your rate now to weather the storm then do it and never look back.

Lot's of people in this industry will tell you lots of different things. Taking the conservative road is often a good one.

As for me, my mortgage is locked it at 4.53% and has been for the last couple of years. Was there lower rates inbetween? Yep. But my peace of mindand knowing that I got a decent rate just the same makes me have no regrets.

Just my .02

If anyone would like to discuss their options further, I would be happy to give guidance.
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It may have been a transfer fee. You never really know when you talk to banks. She said it was a discharge fee because I was closing the mortgage to move it someplace else. I simply told them I wasn't interested in paying it and they paid it for me. I did one mortgage renewal on my own and did a lot of haggling....well, actually a lot of fee refusals. They still got all their money back on the interest paid over the mortgage. I guess most would be surprised by how much they would take back in fees just by refusing them. I think I was up to about $700 in total in fees they wanted to charge me. They had $250 for legal, $250 for discharge and something else I can't remember.....oh I think it was the fee from the other bank since I combined two mortgages. Nothing is really fixed, just remember.

Good advice though.
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Most banks will waive specific fees. Although you need to exercise caution as sometimes you may not get 'the best' rate if they are waiving costs. Nothing in life is free...

Banks are not as hungry for mortages as they once were. the reason being is that they are a depriciating asset. The banking industry is shifting to the financial services industry through investing.

Once again, seek out the best rate for you and decide what kind of term you want to lock in for etc. The bank does not care what term you lock in for. they care about keeping you as a customer.

As for variable rates, the bank loves people who take a variable rate because they don't have to discount on the rates.

Look for solutions that suite you best.

Nobody has a crystal ball but the economic downturn we are seeing is almost unprecedented in our lifetime...

Control what you can control because there are / will be many factors that we may face in the near future that we won't be able to control. ie. layoffs, housing mkts etc.
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