Personal Finance Blog By MoneyRates - November 2007

Rate shoppers who are looking to convert their home equity loans to a fixed-rate second mortgages have been disappointed with the rate quotes and fees associated with a second mortgage. In many cases, homeowners have stopped shopping for the second mortgage and been happy to maintain a line of credit in order to have the more attractive rate. However, beyond just comparing the two APRs homeowners may want to consider the lower monthly payments and peace-of-mind (about future upward rate shocks) if they were to go ahead and lock-in at these historically low fixed mortgage rates.

Lines of credit vs. traditional second mortgage loans

If you are thinking about a home equity line of credit, you might also want to consider a traditional second mortgage loan. A second mortgage provides you with a fixed amount of money repayable over a fixed period. In most cases the payment schedule calls for equal payments that will pay off the entire loan within the loan period. You might consider a second mortgage instead of a home equity line if, for example, you need a set amount for a specific purpose, such as an addition to your home.

In deciding which type of loan best suits your needs, consider the costs under the two alternatives. Look at both the APR and other charges. Do not, however, simply compare the APRs, because the APRs on the two types of loans are figured differently:

The APR for a traditional second mortgage loan takes into account the interest rate charged plus points and other finance charges.

The APR for a home equity line of credit is based on the periodic interest rate alone. It does not include points or other charges.

source: Federalreserve.gov

Money-rates.com researched the rates paid on an online basic checking account from the nation's largest banks to compare to the rates posted on the money-rates.comn checking rates page. The results were more than surprising. While online banks are posting rates as high as 6.00% on accounts which require direct deposit or have deposit limits, it is also quite easy to find 4.00% rates on basic online checking accounts with no fees, no minimum deposits, and no direct deposit requirements. The rates paid by the nation's largest banks on the same style account are as follows: Bank of America (0.25%), JP Morgan Chase (0.10%), Wells Fargo (0.00%), Washington Mutual (0.00%), Citibank (1.00%), and U.S. Bank (0.00%). To make matters worse the fees on the checking accounts listed above were significantly higher than the online banks posted on money-rates.com.

Rates on traditional checking accounts here

Rates on promotional checking accounts here

Two banks which are posting 4.00% yields on online checking accounts without a lot of restrictions and fees are Charles Schwab Bank and E*Trade Bank which are the FDIC-insured bank divisions of the respective brokerage firms. The banks have held this yield through the recent Fed rate cuts and these accounts can be linked to a brokerage firm account at Schwab and E*Trade is desired. Both banks have very good online platforms with all the features of some of the leading online banks. Post your comments regarding your experience with these two banks here.

The Bureau of the Public Debt today announced an earnings rate of 4.28% for Series I Savings Bonds, and a fixed rate of 3.00% for Series EE bonds, issued from November 2007 through April 2008. Earnings rates for I bonds and fixed rates for EE bonds are set each November 1 and May 1. Interest accrues monthly and compounds semiannually. Bonds held less than five years are subject to a three-month interest penalty. Both series have an interest-bearing life of 30 years; the EE bond fixed rate applies to a bond's 20-year original maturity.

I Bond Earnings Rate 4.28%, Fixed Rate 1.20%

The earnings rate for Series I Savings Bonds is a combination of a fixed rate, which applies for the life of the bond, and the semiannual inflation rate. The 4.28% earnings rate for I bonds bought from November 2007 through April 2008 will apply for their first six months after issue. The earnings rate combines a 1.20% fixed rate of return with the 3.06% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U). The fixed rate applies for the 30-year life of I bonds purchased during this six-month period. The CPI-U increased from 205.352 to 208.490 from March through September 2007, a six-month increase of 1.53%.

Series EE Bonds Issued From May 1997 Through April 2005

Series EE bonds issued from May 1997 through April 2005 continue to earn market-based interest rates set at 90% of the average 5-year Treasury securities yields for the preceding six months. The new interest rate for these bonds, effective as the bonds enter semiannual interest periods from November 2007 through April 2008, is 4.11%. Market-based rates are announced effective each May 1 and November 1. A 3-month interest penalty applies to bonds redeemed before being held five years.

Series EE Bonds Issued Before May 1997

Series EE bonds issued before May 1997 earn various rates for semiannual earnings periods beginning between November 2007 and April 2008, depending on dates of issue.

Matured Series E Savings Bonds And Savings Notes

Series E savings bonds continue to reach final maturity and stop earning interest. Bonds issued from May 1941 through November 1977 no longer earn interest. All U.S. Savings Notes (Freedom Shares), which were issued from May 1967 through October 1970, have also stopped earning interest. Series E Bonds with issue dates from December 1977 through April 1978 will reach final maturity during the next six months.