Personal Finance Blog By MoneyRates - January 2009
Will Obama Administration Push Up Long-Term Interest Rates?
January 14, 2009
President-Elect Obama has outlined an ambitious economic stimulus program involving government spending on infrastructure and government hiring. This multi-billion dollar spending program will be on top of the billions to still be spent with the ongoing government bailout of financial companies. While a majority of economists have approved the plan as prudent, a number have questioned the impact on longer-term interest rates. Government borrowing is accomplished through the issuance of Treasury Bills, Treasury Notes, and Treasury Bonds. If the buyers of these bonds, namely foreign countries, become worried about inflation prospects in the United States or even a possible credit downgrade on U.S. debt, they may then demand higher yields to compensate. Higher Treasury yields could push up mortgages rates and other borrowing rates tied to Treasury yields. The threat of higher long-term interest rates is one reason that many financial advisers believe that refinancing at today's historically-low fixed mortgage rates may be a better alternative than waiting for the possibility of even better rates down the road.
The unintended consequence of higher long-term interest rates from the Obama administration's economic plan is of less importance than the critical loss of jobs, wealth, and confidence in the United States. However, Americans should pay attention to their exposure to higher long-term rates either in their investments or in their loans.
GuidetoLenders.com Provides Refinancing Tips for Homeowners
January 11, 2009
Mortgage rates continue to fall in 2009 providing refinancing opportunities for millions of Americans. The Freddie Mac weekly survey of lenders report last week that the national average on a 30-year fixed mortgage is 5.01% and 4.62% on a 15-year fixed mortgage. Unfortunately the refinancing process can seem intimidating and complex preventing some homeowners from contacting lenders. GuidetoLenders.com has simplified the refinancing process by publishing their "Top Ten Refinancing Tips" (authored by writer Richard Barrington) which will help homeowners learn about refinancing and gain the confidence to take the first steps in lowering their monthly mortgage payments.
2. Define the refinance mortgage parameters. Based on the above goals, set targets for interest rates and monthly payments. Decide on the mortgage term and whether to apply for a fixed or adjustable-rate mortgage. A refinance mortgage calculator can help define these parameters.
3. Check your credit rating. In particular, find out whether it has changed since you last applied for a mortgage. A low credit rating will affect the interest rate and the availability of a refinance mortgage.
4. Determine changes in property value. A drastic drop in property value can make it difficult to refinance a mortgage unless that mortgage is old enough to have been paid down substantially.
7. Ask lenders for full disclosure of points, closing costs, and other fees. This will help with setting up apples-to-apples comparisons between refinance mortgage lenders. For example, the lender offering the lowest interest rate may also be charging the most in points. Try to request quotes with as nearly identical terms as possible for comparison purposes.
8. Ask lenders how long they will commit to their rate quotes. Lenders can't offer the same rate indefinitely, but they may commit to locking in a rate for a reasonable period of time to allow for the application process.
9. Use a mortgage calculator to compare monthly payment savings with closing costs and other upfront fees. Besides comparing refinance mortgage quotes against each other, also compare them against your existing mortgage. It is likely that there will be a trade-off between paying upfront expenses to refinance a mortgage and achieving a savings in subsequent monthly payments. It is important to make sure the savings in monthly payments will, in time, adequately compensate for the upfront costs.
10. Check for any prepayment penalties in the refinance mortgage. As mentioned in tip #5, prepayment penalties can dampen the benefits of refinancing. Since another refinancing opportunity may arise in the future, it would be helpful to avoid prepayment penalties in the refinance mortgage.
Posted in: Mortgage, The economy, the Fed, and interest rates
FDIC Bank Failures in 2008 by State
January 6, 2009
The final tally of banks which failed in 2008 was 25 which includes mega-banks Washington Mutual Bank and IndyMac Bank with over $1 billion in deposits. The FDIC insurance fund took a mighty hit, but with an increase in premiums and the ability to slowly sell-off assets of acquired banks the insurance fund is not in as bad as shape as reported in some media stories. The number of bank failures by state were:
Georgia (5)
California (5)
Nevada (2)
Texas (2)
Florida (2)
Missouri (2)
Illinois (1)
Michigan (1)
Washington (1)
West Virginia (1)
Kansas (1)
Minnesota (1)
Arkansas (1)
Of course California is the nation's most populous state with over 37 million people and Georgia has less than 10 million, so Georgia will win the tie-breaker as the worst banking state for 2008. Large states including New York, Pennsylvania, Ohio, and New Jersey made it the whole year without a single bank failure.
Predictions from banking experts range from 10 to 50 bank failures for 2009, but as long as depositors stay within the insurance limits they can rest easy that the FDIC still has a perfect track record of paying out dollar-for-dollar on insurance claims.
Posted in: Banks & Online banking, FDIC
Time to Refinance?
January 6, 2009
The time to refinance home loans is here for millions of Americans as mortgage rates have dropped to their lowest rates in over 35 years. Although rates on 15-year fixed and 30-year fixed mortgages are lower, the process to be approved for a loan is more cumbersome than in the past. For borrowers with very good credit scores and verifiable income, approvals will still be easily obtained. However, for anyone with average-to-poor credit scores lenders are asking for more documentation and are more diligent in their overall approach. Homeowners should compute the actual monthly savings a new mortgage will provide and compare that with the services fees involved to see how quickly they actually start saving money. Mortgage brokers this week have reported that some of their customers have realized savings of $200 to $300 a month. Check the latest rates on various loans below:
Posted in: Mortgage
