Sep
17
60 Minutes of Fedspeak
Filed Under mortgage, personal finance, rates | Leave a Comment
You may not know what exactly Fedspeak is but you probably know its originator, former Federal Reserve Chairman, Alan Greeenspan. Last night on 60 Minutes, Alan Greenspan gave an “exclusive interview” on 60 minutes.
Fedspeak on Suprime Lending:
“While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late. I didn’t really get it until very late in 2005 and 2006.”
Greenspan also discussed what it was like to work under 6 presidents. Baseball and jazz were among other topics of discussion along with his upcoming book “The Age of Turbulence: Adventures in a New World.”
During the interview, Greenspan, comes across as articulate and sanguine. However, as Fed Chairman, the way Greenspan talked was so cryptic that they dubbed it “Fedspeak.”
For more on the interview, visit 60 Minutes. Wall Street Journal also has a great article on Greenspan’s book worth checking out as well in an article entitled Greenspan Book Criticizes Bush And Republicans.
Jan
15
Real estate is a hot topic on the web. One quick search for “real estate” on google nets you 275,000,000 results. That’s a lot of indexed pages on real estate alone. From blogs to news feeds, the amount of information on real estate is overwhelming. If you’re looking for non-location specific real estate sources start here:
- AOL Real Estate
- CNN Money Real Estate
- Forbes Real Estate
- MSN Money
- Real Estate Journal (Wall Street Journal)
- YAHOO Real Estate
With stories like “Business Card Confirms Real-Estate Salesman Is Eddie Money,
” the Onion would’ve made it to the front this list if they had a real estate section.
Apr
21
A new spin on Interest Only Rates
Filed Under mortgage, rates | Leave a Comment
In the last year or two, the 30 Year Fixed Interest Only programs have risen in popularity. These are 30 year loans that have an introductory Interest Only payment for 10 or 15 years before the loan amortizes to a fixed payment schedule.
Confused? Don’t be.
Basically, it’s one loan split into two:
The first loan is an interest only loan for the first 10 or 15 years. So if you took out at $250,000 first mortgage with a rate of 6.5%, the first loan has an interest only payment of $1354.
The second loan is a fully amortized loan for the next 20 or 15 years. So if you only pay interest during the first 10 or 15 years, your principal balance will stay at $250,000. Your second loan will have payments of $1864 (20 year amortization) or $2178 (15 year amortization).
The Real Estate Journal (Wall Street Journal’s Real Estate section) has an article on this loan, called New Type of Mortgage Surges in Popularity.
Jan
1
Prime Rate
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The Prime Rate is the interest rate charged by banks for short-term loans to their most creditworthy customers. It is also used by lenders as an index for equity lines of credit (ELOCs) in addition to other floating rate loans. Each bank sets their own Prime Rate as they see fit. The Wall Street Journal publishes the Prime Rate that is the base rate on corporate loans posted by at least 75% of the nations largest banks.
Over the last 10 years, the prime rate has averaged approximately 7%.
If Alan Greenspan and the Federal Reserve raise the short term interest rates by 25%, you will see a 25% increase in the Prime Rate.
The Prime Rate is affected by the Federal Reserve Boards actions to control inflation. The board will raise or lower what is called the discount rate which directly affects the prime rate. The discount rate is raised when their is a threat of inflation and is lowered when there is a fear of recession.
Prime Rate is not directly correlated with mortgage rates but most compensating factors are. So when there is movement in the Prime Rate you will most likely see movement in current mortgage rates.
While the Prime Rate affects Home Equity Loans and short term money, the 30 year fixed mortgage is based off of the mortgage backed security.
A rate index which is the prevailing rate that banks charge to lend money to corporations.
Unlike the Fed Funds Rate and the Discount Rate, the Federal Reserve does not set a target for the Prime Rate. Nonetheless, when the Fed raises or lowers the target for these two short term rates, Prime Rate almost always follows suit because of the change in the cost of money.
Prime rate is the interest rate which banks will charge to their best customers. Any adjustments to the prime rate are publicized in the news and are what moves the indexes in most adjustable rate mortgages, especially HELOC’s. Adjustments in the prime rate do not usually affect other types of mortgages, but the same factors that influence the prime rate also affect the interest rates of mortgage loans.
The Federal Reserve Board also know as the FED is controlled by Board of Governors which consist of seven elected officials. These individuals use many factors when determining whether to lower are raise the rates. In fact if you want to get real technical the FED doesn’t actually raise or lower rates. They control the monetary policy which in turn affects the interest rate movement up or down.
Jan
1
A home equity loan is a loan that uses your home as collateral. Your home equity is the part of your home that you actually own and this is the guarantee for your loan.
Home equity loans may not be the best type of loan to get in a volatile market since they are tied to prime rate and could go up very quickly.
There are basically two types of home equity loans, HELOAN and HELOC. HELOAN has a fixed interest rate. The borrower usually receives a check for the entire loan amount immediately after closing (technically, three days after closing). The monthly payment, consisting principal and interest, is fixed for the entire loan term. HELOC is a line of credit, much like the line of credit your credit card issuing bank extends to you, with your home as the collateral. The borrower may make withdrawals and repayments as often as needed, up to the credit limit. The interest rate is adjustable, usually pegged to a certain index, such as the Prime Rate published in the Wall Street Journal. Monthly payments vary depending on the outstanding balance and interest rate. Required payment consists only of the interest charge on the amount owed for the preceding month. Repayment of the principle is not required until the second half of the loan term.
This loan is ideal for those who prefer the budgeting ease of fixed payments.
The factor that determine your HELOC interest rate you get is the margin you receive plus the current prime rate. The margin you get will also affect your rate however this number will not change like prime. A few of the factors that determine the margin is the combined loan to value of your current 1st mortgage and proposed 2nd, desired HELOC line amount and your mid credit score.
Some lenders are now offering no-closing-cost home equity lines of credit (HELOC), Now those “house poor” homeowners may now have the equity, which they have been putting half of their paychecks in to build, work for them for a change. And No Closing Cost? Hey, that means no title fees, no appraisal fees, no recording fees.
Home Equity Line of Credit is abbreviated as HELOC. This refers to a loan in which the lender agrees to lend a maximum amount within an agreed time period. A Home Equity Line of Credit in many ways is similar to a credit card. At closing you are assigned a specified credit limit that you may borrow up to (this is not a check). A draw period usually lasts anywhere from 5 to 25 years and allows you to borrow HELOC funds whenever you feel the need; you’re only required to pay back the amount you use plus interest.
A Home Equity Loan is a loan secured by the equity in your home and provides a potential tax deduction. You can use the equity you’ve built in your home for any purpose—consolidating debt, purchasing a car, installing a pool or paying for your child’s college education.
Prime rate has changed drastically lately and those that had great HELOC’s a few years ago are now paying MUCH higher rates. Your mortgage broker can compare the different options for you!
It is also possible to get a HELOC in the FIRST LIEN position. Before people just though of a HELOC as a “2nd Lien” loan, but that is not the case.
If your equity is sitting in your house it’s not making money for you. You can take out a loan for the equity or a portion of the equity in your home and invest in a growth fund and accumulate the funds to pay off your house faster than if you just paid down on your one mortgage. You equity it’s self doesn’t have value until you use it. And your interest is tax deductible.
Use a home equity loan for major purchases such as a new car, boat or motor home. The interest rates and payment amounts are sometimes much more appealing than a regular line of credit or loan.
HELOC or Home Equity Line of Credit mortgages are very often used as the 20% second mortgage component of an 80/20 style 100% financing deal.
Most home equity lines use the prime rate as a base for setting interest rates. For example, you hear lenders describe rates as prime + zero or prime + 1. This means the borrower will pay monthly interest according to the Prime Rate (lets use an example prime rate of 5.00%) plus a margin. In this case, prime + zero would equal an interest rate of 5.00%, or in the case of prime + one it would be 6.00%. Additionally, most home equity lines have interest only payments.
Oct
24
Blogging using Blogger
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Recently Mark Cuban the owner of the Dallas Mavericks posted “Get Your Blogspot Shit Together Google.” A synopsis of this blog is basically that blogspot has unleashed a wave of spam blogs aptly named splogs. Blogspot is Google’s host for their blogger software. These splogs typically have links to nefarious sites and artificially inflate those sites page rankings.
Today’s Rocky Mountain News reprinted an article by David Kesmodel of the Wall Street Journal called “Spammers’ blog clog searches on Internet.” In his article, Mr. Kesmodel cited the aforementioned blog by Mark Cuban.
Here are my thoughts:
- There will always be spam on the internet. It’s part of the internet culture.
- There will always be spam in Hawaii. It’s part of the Hawaiian culture.
- The tides have turned. Typically blogs summarize events in major publications, now major publications are summarizing blogs.