November 10, 2008 at 12:02 pm · Filed under Affordable Housing, Credit Crisis, Gulf Coast Housing, Pensacola, Residential, The Mortgage Market
Stocks are higher this morning following a rally in the Chinese market after a government stimulus plan for $586 Billion was announced to help relieve their struggling economy. As the stock market shows signs of life, it will continue to put pressure on bonds this week to hold their current levels above established resistance.
Also scheduled this week, the Treasury Department will be auctioning off $55 Billion in treasury notes which will no doubt put even greater pressure on the bond yield. If the yield on mortgage bonds falls, mortgage rates will go up to meet the market demand.
Watch rates carefully this week. If you have a loan in process, it would probably be prudent to lock ahead of potentially bad news in the financial markets. If you are still looking for a house, or are not ready to lock, it may cost you on your mortgage rates later this week.
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October 24, 2008 at 12:08 pm · Filed under Affordable Housing, Gulf Coast Housing, Residential, The Mortgage Market
Mortgage bonds move below 200 day average.
It is really amazing how much the global money markets are intertwined. Overnight, Japan’s stock market plummeted after lower than expected earnings were reported for Samsung and Sony. That ripple effect moved over to Britain’s markets where the economy shrank for the first time since 1992, signaling a confirmed recession. The combination of the foreign markets having a really bad day led the Dow Futures to halt trading before the open this morning. Halting trading on Dow Futures is extremely rare, and a sure sign of volitility.
In normal market conditions, a selloff in stocks would mean money was moving into bonds, and would typically signal a good day for mortgage rates. Today, however, because of the continued liquidity issues with the market, the rush seems to be towards cash for safety. Mortgage bonds moved below the 200 day moving average which is generally a sign of long term trends. If you have an active mortgage file that has not yet been locked, it would be prudent to do so today ahead of uncertain volitility and worsening rates.
Some good news came out today. Existing homes sales soared to a 13 month high signaling a boost in the real estate market. And, Oil was trading as low at $64 per barrel. This is due in large part to the strenghening dollar as compared to other global currencies. But, when you are at the pump getting gas for $1 less than 3 months ago, few people care why, they are just glad to see it.
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October 21, 2008 at 9:53 am · Filed under Affordable Housing, Condos, Equity Key, Equity Sharing, Foreclosure Help, Pensacola, Residential, Reverse Mortgage, Seasonal Rentals, The Mortgage Market, Vacation Properties
Even if you do not qualify for a reverse mortgage, there are other options.
A Reverse Mortgage can be a useful tool in helping seniors to maintain their independence and stay in their homes as long as possible after retirement. But, a reverse mortgage is not without limitations. People with a high value home may be shocked at how little they can qualify for in a reverse mortgage because of the loan limits with FHA.
To fill this void in the market, a relatively new product called equity sharing has been designed to help those that don’t qualify for a reverse mortgage. Even if you do qualify for a reverse mortgage, equity sharing can be an alternative that is not a mortgage and does not accrue interest.
With equity sharing, the property owner (age 65 to 85) agrees to share the future appreciation of the property with the financial institution in exchange for cash today. The home owner is allowed to keep 100% of the equity based on current appraised value. Then, going forward, the home owner will split the appreciation 50/50 with the financial institution. As compared to a reverse mortgage, equity sharing does not have an interest rate accruing, it is not recorded as a mortgage on the property, and it can be used on properties other than the owner’s primary residence.
Example 1:
A home owner in California has a primary residence that is worth $1.2 million with a current mortgage balance of $500,000. Because the maximum allowable reverse mortgage is $417,000, this home owner would not qualify. But, with equity sharing, he could get up to $180,000 in cash (15% of the current appraised value) without a loan or a monthly payment, and without the need to payoff the current mortgage balance (assuming the current mortgage is not a reverse mortgage or a negative amortization loan).
Example 2:
A home owner in Tennessee has a beach house in Florida. He wants to get a reverse mortgage on the beach house, but doesn’t qualify because it is not his primary residence. The house is worth $750,000 with a current mortgage balance of $300,000. He would qualify for $112,500 in exchange for a 50% stake in future appreciation. Ten years from now the home owner sells the house for $1.2 million. The difference in equity is $450,000 since agreement was made. The equity partner takes $225,000 (half of the appreciation) plus an 8% surcharge to cover transfer costs and Realtor fees, leaving the owner with net proceeds of $879,000, plus the $112,500 already received at the time of the agreement.
While it does create opportunities, equity sharing is not without its disadvantages. Depending on how rapidly you think the home will appreciate, the costs could significantly outweigh the costs of a reverse mortgage or other interest bearing alternative. That being said, it is one of the more realistic alternatives to reverse mortgages available today.
If you would like to find out more about a reverse mortgage or an equity sharing program, send me an e-mail at steve@steverussellonline.com with your name, phone number, date of birth, state where the porperty is located, and the value and mortgage balance on the property. Or, call me toll free at 888-257-8383 for a free consultation.
Pensacola Mortgage
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