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Tag: Anna Maria Island mortgage

Mortgage interest rate future ‘uncertain’

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Happy New Year, although this year may not be so happy for homeowners and worse for potential homeowners. Both groups are getting hit with increasing costs they never assumed would come. More next week about the growing expense of owning a home.

On Dec. 18, the Federal Reserve enacted a quarter point reduction in interest rates. Sometimes financial markets and mortgage rates react favorably to rate reductions and sometimes they don’t. This time, both the stock market and the mortgage markets didn’t like it. The stock market took a dive, losing more than 1,100 points for the Dow and the mortgage rates for the following two weeks went up.

The reason for this is the Federal Reserve signaled earlier that inflation was under control and they anticipated further rate reductions going forward. Well, we all know that we probably won’t see 3% mortgage interest rates again, but buyers and investors were anticipating at least a little relief on rates. The Federal Reserve backed off their “inflation is under control” narrative and didn’t leave much hope for future rate adjustments.

Mortgage rates for a 30-year fixed rate mortgage went up to about 6.7% from around 6.4% or 6.5%. It doesn’t seem like a lot, but every increase results in lowering the amount of home purchasers can afford.

The projection for 2025 isn’t much better, either, in spite of the fact that in January 2023 some analysts thought rates would be around 4.5% by the end of 2024, obviously a major overstatement. Federal Reserve Chair Jerome Powell says: “Forecasts are highly uncertain, forecasting is very difficult.” This is where my head started to explode.

Nevertheless, the big brains of finance who admit to the difficulty in forecasting are still forecasting for the new year. So, here’s what some of them are saying.

Fannie Mae’s chief economist says, “Long-run interest rates have moved upward over the past couple of months following a string of continued strong economic data and disappointing inflation readings.” They are putting the average 30-year fixed rate at 6.5% in the beginning of 2025, declining to 6.1% in 2026.

The Mortgage Bankers Association (MBA) in its 2025 finance forecast indicates that mortgage rates will gradually slide from 6.6% at the beginning of 2025 to 6.3% through 2026.

The National Association of Home Builders is forecasting 6.12% in 2025 and 5.71% in 2026. The National Association of Realtors (NAR) is predicting 5.9% in 2025 and 6.1% in 2026. And, finally, realtor.com is saying only that in 2025 the range will be between 6.2% and 6.3%. It is interesting that the organizations involved in actually selling homes are more optimistic than the financial institutions.

Getting back to Fannie Mae, they are saying the 30-year fixed rate mortgage rate is now expected to stay elevated between 6% and 6.5% for the next two years. But since “forecasting is difficult,” who really knows?

My advice to potential homeowners who require a mortgage is act now, since you really won’t know what the rates will be going into 2025. If you find a home you like that you can afford, putting it off waiting for a better mortgage rate is a bad decision. You’ll never catch up with the market just waiting for a ½ point decline or even a full point decline. Live your life now, buy your home and get a crystal ball.

Title insurance and storms

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Hopefully, Debby with her rain, Helene with her surge and Milton with his wind are in our rearview mirrors by now, not forgotten, but we survived. Next, we can look forward to more mundane real estate issues like insurance.

What if you were ready to close on a new property and the possibility of a named storm was on the horizon? This situation could be the ultimate inconvenience since there is a very good chance you may not close your sale on time, costing money and delays with movers, utilities, and possibly short-term living arrangements. This is an important thing to keep in mind when you live in a hurricane zone like we do. Since both buyers and sellers are in a real estate transaction together, they both should be motivated to give allowances if this is happening.

This sometimes little-known insurance issue is called a moratorium, also known as a binding prohibition. They are issued by insurance companies for certain high-risk areas. During hurricane season, insurance companies wait until 24 to 48 hours before the impact to issue a moratorium on buying new policies. This could delay a closing since the insurance companies will not bind or cover the property in question until the storm has passed. If this happens to you, there is almost nothing you can do about it short of closing the property without property insurance – a non-starter if you are financing any part of the sale.

Since we’re talking insurance, there have been some recent problems in the area of title insurance. Just to review, when you take out a mortgage, one part of your closing costs will be title insurance. If you aren’t taking out a mortgage, you will not be required to purchase title insurance, but most buyers do and all lenders insist on it and expect buyers to pay. The premium for title insurance is a one-time charge and the policy protects the lender. You also can purchase owner’s title insurance to protect yourself but that is optional.

Title insurance covers third-party claims on a property that don’t show up in the initial title search and arise after the closing. The title company searches for public records related to your home to try to find any title defects that could affect the lender’s or buyer’s property rights such as liens, including tax liens or unpaid bills; easements that give others the right to use your property; and encumbrances like zoning laws and covenants imposed by homeowner associations. A “cloud” on the title can usually get resolved with the cooperation of the previous owner and/or the entity placing the lien.

In the wake of the National Association of Realtors settlement over real estate brokerage commissions, government officials are looking at compensation paid to real estate professionals who recommend title companies. This is happening without the knowledge or disclosure to the buyers who are paying the fees, therefore, potentially elevating the fees charged for the title insurance. The title insurance industry is under scrutiny by the federal government in an effort to lower the upfront costs of obtaining a mortgage.

The crackdown on partnerships with title companies is the same general trend as addressing brokers’ commissions. Just to be clear, this partnership arrangement with title companies is not happening all over, and carefully analyzing the title fees before you close a property is a wise thing to do.

Title insurance is just one more type of insurance a property owner needs to be aware of. We’ve turned the corner and it’s time to pick up the pieces and move on.

Mortgage rate relief?

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Aug. 9 was an interesting day. Manatee County was still cleaning up from the flooding and record-breaking rain from Debby and the mortgage rates hit the lowest level in over a year. What’s the connection? Well, you can’t predict a storm and you can’t predict mortgage rates.

We’ve been waiting for a long time for the day when we see interest rates decrease in any meaningful way. Well, it happened, but will it stick and will it shepherd in more rate cuts?

The average 30-year fixed mortgage rate declined significantly in August since hitting a 2024 high of 7.44% to start May. The average rate on the benchmark 30-year mortgage dropped 26 basis points from 6.73% to 6.47% for the week ending Aug. 8, according to Freddie Mac. This was the sharpest weekly decline in about nine months. A basis point is one one-hundredth of a percentage point.

The key factors here are that home prices nationally fell last year to their lowest level in nearly three decades and 2024 has not been much of an improvement. In addition, mortgage rates have roughly doubled since the Federal Reserve began its campaign to curb inflation in early 2022. This increase in rates has pushed up the monthly cost to borrow for a home, blocking buyers who do not qualify for the additional monthly cost. Finally, the other elephant in the real estate room is the inventory of homes for sale. They have been slowly rising but they remain well below historical averages.

Some mortgage advisors say this is happening faster than expected and predict the central bank will approve one rate cut later this year. This should prompt a gradual easing of mortgage rates, but Freddie Mac still expects mortgage rates to remain above 6.5% through the end of the year and then decrease below 6.5% in 2025.

Fannie Mae predicts the rates will average 6.8% in the third quarter and 6.7% in the fourth quarter. They feel this downward trend will continue into the next year, averaging 6.5% in the first quarter of 2025.

The National Association of Realtors thinks rates will average 6.9% in the third quarter and 6.5% for the fourth quarter, going up to 6.7% by the end of the year. In addition, Chief Economist Lawrence Yun says the second half of 2024 will experience moderately lower mortgage rates, higher home sales and stabilizing home prices.

The Mortgage Bankers Association says rates will average 6.8% in the third quarter, going down to 6.6% in the fourth quarter and continue trending downward next year.

All the above is pretty much in agreement, but one of the most interesting opinions came from Melissa Cohn, regional vice president at William Raveis Mortgage, who was interviewed by a Forbes advisor. She hopes mortgage rates will hover in the 5% range next year, but says the presidential election could factor into it, something I have also heard from local brokers. Fiscal policies could impact inflation, which hopefully can stick at 2%, allowing for reduced interest rates for the next five years.

Nevertheless, she feels that when the rates come down, there will be another hot housing market where there are more buyers than sellers, jacking up prices since the problem of low inventory has not been resolved.

Everyone is still holding their breath for the next several months and waiting to see what the Federal Reserve is signaling for next year. Aug. 9 hit a low and a 6.5% rate may not be 3.5%, but it’s better than 7.5% and may just be enough to get everyone moving. Now on to the next storm.

Reverse mortgage loans explained

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Anyone who considers themselves a senior, which I certainly do, at some point will probably have considered a reverse mortgage. It’s not a conventional mortgage designed for the majority of home purchasers but rather a vehicle for senior homeowners to tap into their home equity.

What exactly is home equity? Home equity is the amount of your home that you actually own. Specifically, the equity is the difference between what your home is worth and what you owe your lender or lenders. Don’t confuse it with “mental equity,” which is a term sometimes used in real estate where sellers think they know what their property is worth.

Seniors who are 62 or over can apply for a reverse mortgage, releasing some of the equity in their property. With property values increasing in the past three to four years, seniors who have owned their homes for a long time are considering reverse mortgages with an eye to staying in their homes. Homeowners are still responsible for paying property taxes, insurance and maintenance; however, the repayment of the loan is deferred until the homeowner dies, sells or moves out of the home.

In addition to being 62 or over to qualify, you also need to have enough equity in your home. The loan works by making payments to the borrower based on a percentage of the equity that has been built up in the home. The factors that determine the loan amount include your age, the value of your home, the interest rate and the FHA mortgage limit, $1,089,300 as of this writing.

The obvious benefit is that you can continue to live in your home and retain the title. The proceeds of the loan are generally tax-free cash, so you can use the money as you see fit for improvements and everyday living expenses. You choose the disbursement option; lump sum, monthly payout, quarterly, etc.

The primary drawback of reverse mortgages is that the loans are generally more expensive than other financial products. The balance of the loan increases over time as does the interest on the loan and the fees associated with the loan, eating into any home equity that is left.

If this is something that you might consider, the first thing you should do is attend a counseling session from a licensed third-party counseling agency. The Department of Housing and Urban Development (HUD) maintains a list of counselors available in Florida.

Next, research and identify companies that specialize in reverse mortgages. Factors to look for when evaluating companies are years in business, number of products offered, customer service availability, state licensing, Better Business Bureau (BBB) ratings and the inclusion of a mobile application. Once you have found a company you’re comfortable with, discuss what options may be available to you as far as qualification, timeline and any other questions you may have.

When the application is completed, the process is similar to a traditional mortgage application. The loan will go to an underwriter and appraiser and once approved, a distribution is made.

No matter what age you are, it’s tempting to look at all the equity you have in your home and convert it into a “piggy bank.” Like any loan where you reduce your equity, whether it’s a home equity loan, refinancing your current mortgage or a reverse mortgage, always remember that the funds you withdraw are real money and analyze what the effect of that could have on your future. Get professional advice and good luck.

Castles in the Sand

Do you need a mortgage button?

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

The tradition of a mortgage button is a little scrimshaw button mounted atop a stairway’s newel post, as a symbol the mortgage was paid off. This is something I saw for the first time on Nantucket Island where my uncle and his wife retired many years ago. Ever since then, I’ve been fascinated with the concept of a mortgage button. Now, however, paying off your mortgage may not be as impressive as in times gone by for every homeowner.

In today’s world, there are many forms of retirement, or not retiring at all. Because of Zoom, inflation and interest rates, many individuals who would have retired even 10 years ago are postponing retiring. If your choice is to retire, are you planning to pay off your home’s mortgage with other assets or will you keep your mortgage in place? Retiring with your home “free and clear” was a goal of previous generations and many homeowners still strive for this, but financial managers may want to have a further discussion about the real benefits.

Even if you decide to give up work or work part-time, many have calculated that carrying a mortgage is a better choice. This is especially true if you have a low-rate mortgage because of either owning your home only a few years or, like many people, having refinanced your existing mortgage when rates were ultra-low. According to the Federal Reserve, nearly 58% of those ages 65-74 had mortgages or home-equity lines of credit on a primary residence in 2019. This is up 22% from 1989 based on available statistics.

Even if you can afford to pay off your mortgage before retiring, does it make sense to deplete your cash or investments for this use? A financial advisor will look at all of your income and assets and make a recommendation designed specifically for you, including safe, low-risk investments.

In addition, your tax consultant needs to be in the loop since tax ramifications must be considered. Although the 2017 tax overhaul significantly raised the standard deduction, there are still homeowners who will benefit from a home mortgage interest deduction.

Finally, keeping a low-rate mortgage frees up equity that you otherwise would not have access to. After retirement or switching to part-time work, your family income is obviously reduced, which would make it difficult to qualify for a new mort-

gage or home equity loan should you need it for a health emergency or other reason. Or just having the money available for a new car, dream vacation or to help out a family member may be enough of a reason not to pay off your mortgage.

Paying off your mortgage and retiring with no debt certainly gives you peace of mind, and that’s something to be proud of and a reason to get a mortgage button. The mortgage button can also be called a brag button indicating there is no lien on the property. Part of the mortgage button’s myth or fact is also another little-known aspect that the mortgage, when paid off, is stored in the newel post at the base of the home’s stairway before the mortgage button is installed.

Historians have debated the truth about the mortgage button for over a century. As for me, it’s a great story, true or not, and a special memory from my first trip to a magical island. Happy holidays!