Feldman Law Center – What to do About Interest Rates
January 5th, 2010 by adminWhen people hear about loan modifications, they learn that one of the most common ways to lower your monthly mortgage payments is to adjust your interest rate. For example, if you have an adjustable rate mortgage, you could get your interest rate lowered for some period of time. You could also switch from an adjustable rate mortgage to a fixed rate mortgage, and this way not only would your mortgage payment be cheaper, but you could know what it will be over the long haul.
The challenge is, adjusting your interest rate, or setting your interest rate permanently may not be your best option. It may seem simple, but you could have other choices available to you that you are not aware of. One of the benefits of having a loan modification attorney working with you is that they may be aware of options you are not aware of.
For example, a loan modification does not necessarily have to involve an interest rate adjustment. Other loan modification options involve principal reductions and lengthening the term of your loan. If you get a principal reduction, it could mean that a loan for $500,000 could be lowered to $380,000, which would obviously have a huge impact on your monthly mortgage payments. You could also get the term lengthened, and go from a 30 year mortgage to a 40 year mortgage. An extra ten years would give you an extra 120 months to spread out your payments, which would also lower your monthly mortgage payments.
Interest rates were at an all time low in December, and stayed there for quite a while. However, they’ve gone up and down and recently have reached their highest point in quite a while. This sort of uncertainty is not beneficial to your current situation, especially if you’re facing foreclosure. The federal government has instituted many plans to lower interest rates, including using $600 billion to get more buyers into the market in hopes of stabilizing home prices and reviving the economy. However, the federal government’s effectiveness has gone up and down.
Loan modification attorneys can be a trusted ally in the battle to keep your home. A California loan modification attorney can give you the lowdown on your situation, as well as the many options available to you. While getting an altered interest rate may be to your benefit, it could also be that other options work better for your situation. Lowering your principal balance could be an option, and it would also be a great long term solution. Changing the length of the loan could also be a great long term option, and both of these would lower your monthly payments.
If you are facing a foreclosure, or if you are facing some other type of financial crisis, a loan modification could be your best option. These days, almost everyone is watching the economy, waiting for their own situation to worsen. Unfortunately, these are tough times, but a loan modification attorney could help out quite a bit.
Premature House Aging: What You Can Do About It
November 24th, 2009 by adminJust like your skin, your home benefits from regular cleaning and care to keep from looking older than it is. Buyers are usually looking for a home that has enjoyed some upkeep and care from the owners, not some property that’s been abused and discarded. Any home that isn’t taken care of will show the signs of aging and decay long before it should.
There are many specific ways that your property can become prematurely aged but most of them fall under two categories: lack of maintenance and lack of cleaning. Maintenance includes the upkeep of parts of your house like gutters and furnace, ensuring that those parts work. Cleaning covers more of the day to day vacuuming, shampooing, scrubbing, etc.
Many pictures posted online of homes for sale give the impression that no one ever cleans them. Pictures showing excessive clutter or messy bedrooms imply that the owners don’t care enough about their home to pick up after themselves. Even worse, some homes are in this condition when prospective buyers come to look at them. Dirty smudged walls, animal hair in the corners, and grease build up in the kitchen can all make a home look older than it really is.
Lack of maintenance is an even worse offense than lack of cleaning however. Tenants who don’t clean a home might cause damage that requires fixes such as repainting or re-flooring but a lack of maintenance can result in major appliances needing replacement or worse. Homes can end of with some serious mould problems due to leaky roofs or poorly maintained gutters. Issues like this can contribute to health problems and odours in the home and be very costly to fix if left too long.
When buyers walk through a house that hasn’t been well cleaned or maintained it immediately turns them off buying a property in many cases. Any areas that haven’t been well maintained are liable to come to light during a home inspection, so don’t think that you’re saving any money by not doing the maintenance. At the very least, the offers that you do receive will be significantly lower than if the house was tidy and clean.
How Do You Go About Bad Credit Auto Refinancing?
November 21st, 2009 by adminIf you find it completely impossible to pay off your auto loans, you might want to have bad credit auto refinancing by having the option of refinance my car. There are plenty of bad credit auto refinancing providers who are going to help you in getting refinance car loans, in a manner which is easy for you to get shot off all your debts in an easily processed and timely manner.
The problem with the global recession is that it is not possible for a large number of clients in the market today to pay off their auto loans and they need opt to refinance car loans. You can take the bad economic situation to be one of the reasons, as well as a low employment rate, which is causing this sort of panic in the market today. That is the reasons why many of us find ourselves with bad credit rating just because we defaulted on a number of long-overdue monthly payments which create lot of problems in having the facility of refinance my car. Therefore you should go about looking for any other options, where you can get the best bad credit auto refinancing service provider who is not only going to give you enough of money to pay off your car loan, but also going to give you that money on a reasonable rate and on terms and conditions which are going to make it extremely easy for you to repay him the money back with interest.
You might want to go online and look for such bad credit auto refinancing service providers which provide refinance car loans or helps to refinance my car. You can also approach traditional moneylender in your city, and asked them if they have any programs for bad credit auto refinancing. You might be surprised at the number of service providers of bad credit auto refinancing who have started up auto refinancing programs for people who have bad credit. After all bankers also have to make a living, do not they, so if they are reasonably satisfied that it is possible for you to repay off the loan amount in a given and fixed period of time, it is possible for them to take a chance on you. So, all you have to do is look at the rate of interest which they are asking you, look at the terms and conditions and after that, you might want to take out a bad credit auto refinancing loan from the money lending company of your choice.
The Facts About Auto Refinance With Bad Credit
November 20th, 2009 by adminBad credit car refinancing is for those individuals who have purchased their cars from a bad credit lender and have been paying their monthly installments regularly. Doing this helps to rebuild a solid credit history and puts the borrower’s finances in better order. Once the borrower’s is on a secure financial footing, he/she can confidently apply for bad credit auto refinancing. One of the most important reasons why most people decide to opt for auto refinance is that it helps to reduce the amount of their monthly payment. Another reason could be that the current rates of interest are significantly lower than when the borrower originally took on the loan. In either case, refinancing is a good choice.
Qualifying for a refinance auto loan is easy if the borrower has been making the monthly loan payments on a regular basis. However, in case he/she has been rejected by a lender due to poor credit ratings, the best alternative is to approach a bad credit auto refinance lender. There are a number of factors that need to be considered before getting involved in process of refinancing a car loan. In actual terms, car refinancing means that the borrower has to start the entire process all over again. It involves taking on a new loan that helps to pay off the outstanding amount on your car loan. This is where the credit history of the borrower makes an important statement about his/her financial stability.
Refinancing Car Loans with Bad Credit
The finance company may also expect the borrower to put down a certain amount of money as a down payment. The greater the down payment, the lower the rate of interest. Another important factor that a potential borrower needs to consider is that of the tenure of the car refinancing loan. Here he/she also needs to determine how long he/she intends to use the car. For instance, if the borrower wishes to keep the car just for another year or so, auto refinancing is not the best option. Trading in the old car for a new one is probably the best thing to do in this case.
However, if the decision to refinance the auto loan has been made, the best thing to do is to conduct some online research about the best deals currently available in the market. If the current lender has rejected the borrower’s application, there are many other lenders out there who would be more than willing to work borrowers looking for auto refinance with bad credit. Shop around for a bargain and make sure you get a fair deal.
What Mortgage Law Is All About?
November 18th, 2009 by adminMortgage is the security of the loan to finance the purchase of a property with specified interest rates. Mortgage is the lender’s security for debt. This is the most common method of financing property transactions. The mortgager is the borrower in the mortgage and he transfers the interest. On the other hand, the mortgagee is the investor or a financial institution that provides loan or other interests in exchange of the security interest. As per the residential mortgage law, if the borrower fails to pay, the mortgagee has the right to sell the property to pay off the loan.
Generally the mortgage is paid in installments where the borrower needs to pay the interest as well as the principle amount that was borrowed by the mortgagor. If the mortgagor fails to make payments, then this can result in the foreclosure of the mortgage. As per the acceleration clause in the mortgage, the borrower has to pay off the loan immediately. Foreclosure permits the mortgagee to state that the debt is due. Acceleration clause is applicable in residential and commercial properties. This law can also be imposed if the borrower tries to sell or transfer the property to someone else. In order to avoid foreclosure, the borrower can clear the due payments and the cost incurred for the missed payments.
According to the state law and the terms and conditions of the mortgage agreement, the foreclosure process is carried on. The mortgagee can negotiate with the mortgagors to adjust the terms of the mortgage. There are two kinds of foreclosures that are judicial foreclosures, which require a court order, and non-judicial foreclosures, which can be settled outside the court. If power of sale clause is there in the mortgage, non-judicial foreclosures can be used.
All You Need to Know About Debt Settlement Programs – Debt Settlement Help
November 8th, 2009 by adminIf you’re being crushed by the weight of to many debts and you’re desperate to get out from underneath, debt settlement may be the right option for you. A good debt settlement company can help you lower the overall balance on you debts, potentially even combining multiple debts into a single monthly payment that is lower that all you exiting payments combined. Even without consolidation, a lower monthly payment on your largest debts can result from lowering your total balance. Debt settlement is an effective way to relieve your financial woes without declaring bankruptcy. If you want to pay you debts, but your payments are unrealistic, look into debt settlement options today.
Debt Settlement Can Lower Your Overall Balance
If you’re receiving multiple calls every day demanding money for debts you cannot afford to pay, odds are you’re getting fed up with your situation. You may sometimes feel like your creditors are behaving unfairly, but the truth is they are just trying to claim money that is owed to them. If you are legitimately not going to be able to pay the full amount, creditors are usually willing to agree to a debt settlement that will lower the amount you owe them. A lower amount is better than nothing, so creditors will often be willing to forgive the remaining money as long as you pay what you can. When you pay off your debts at the lower balance, they are reported to the national credit agencies as paid in full. Debt settlement can be a very useful tool in avoiding bankruptcy, which does stay on your credit report for years. Debt settlement is the light at the end of the tunnel. If you can use debt settlement to avoid bankruptcy, why wouldn’t you?
Debt Settlement Can Lower You Monthly Payments
The result of lowering the total amount you owe is that your monthly payments often go down significantly as well. Lower monthly payments means more money for other necessities, such as food, gas, clothing, or whatever you’re being forced to cut back on now to make your larger payments. Once your regular payments are back within a range you can afford, you won’t have to deal with creditors trying to take collection action against you. Oftentimes a debt settlement agreement can also include the dropping of existing late fees and penalties. In addition to the lowered total due, the exclusion of these fees can be a serious relief to your bank account.
Debt Settlement is Preferable to Bankruptcy
The social stigma associated with bankruptcy is not entirely without cause. While bankruptcy may be necessary in extreme cases, the truth is that bankruptcy can ruin you. A bankruptcy stays on your credit report for up to ten years and is visible to anybody who checks it. Bankruptcy is intended for people who cannot pay any of their debts. If you are wiling to pay as much as you can, but need your debts to be lowered, then debt settlement is by far the better option.
All You Need to Know about Debt Settlement Programs
November 7th, 2009 by adminIf you’re being crushed by the weight of to many debts and you’re desperate to get out from underneath, debt settlement may be the right option for you. A good debt settlement company can help you lower the overall balance on you debts, potentially even combining multiple debts into a single monthly payment that is lower that all you exiting payments combined. Even without consolidation, a lower monthly payment on your largest debts can result from lowering your total balance. Debt settlement is an effective way to relieve your financial woes without declaring bankruptcy. If you want to pay you debts, but your payments are unrealistic, look into debt settlement options today.
Debt Settlement Can Lower Your Overall Balance
If you’re receiving multiple calls every day demanding money for debts you cannot afford to pay, odds are you’re getting fed up with your situation. You may sometimes feel like your creditors are behaving unfairly, but the truth is they are just trying to claim money that is owed to them. If you are legitimately not going to be able to pay the full amount, creditors are usually willing to agree to a debt settlement that will lower the amount you owe them. A lower amount is better than nothing, so creditors will often be willing to forgive the remaining money as long as you pay what you can. When you pay off your debts at the lower balance, they are reported to the national credit agencies as paid in full. Debt settlement can be a very useful tool in avoiding bankruptcy, which does stay on your credit report for years. Debt settlement is the light at the end of the tunnel. If you can use debt settlement to avoid bankruptcy, why wouldn’t you?
Debt Settlement Can Lower You Monthly Payments
The result of lowering the total amount you owe is that your monthly payments often go down significantly as well. Lower monthly payments means more money for other necessities, such as food, gas, clothing, or whatever you’re being forced to cut back on now to make your larger payments. Once your regular payments are back within a range you can afford, you won’t have to deal with creditors trying to take collection action against you. Oftentimes a debt settlement agreement can also include the dropping of existing late fees and penalties. In addition to the lowered total due, the exclusion of these fees can be a serious relief to your bank account.
Debt Settlement is Preferable to Bankruptcy
The social stigma associated with bankruptcy is not entirely without cause. While bankruptcy may be necessary in extreme cases, the truth is that bankruptcy can ruin you. A bankruptcy stays on your credit report for up to ten years and is visible to anybody who checks it. Bankruptcy is intended for people who cannot pay any of their debts. If you are wiling to pay as much as you can, but need your debts to be lowered, then debt settlement is by far the better option.
Information About Property Letting Services
November 3rd, 2009 by adminThe property owners can think of letting property with property agents who can find tenants quickly and take care of everything with the tenancy and can also manage the whole letting process. The rent of the property depends on the size of the property and the location of the rented property. The successful property letting means to have highest possible rental figure and finding a suitable tenant quickly with minimal vacant periods. The main aim of property letting services is to settle lease agreements to suit both landlord and tenants manner.
You can find various property letting services providers who quickly and effectively leased your residential or commercial property to the right tenant at a very competitive rental. The letting services provide you the database of premium properties ready or being ready for letting out. Whether you are going to rent your property or searching for rented property, using letting services means that lot of your work might be taken care and you can utilize your valuable time to do other things. Letting agents have the ability to found good tenants or landlords in a short amount of time.
Why you need property letting services?
While searching for rental property you need to take time of visiting letting services provider who will assist you regarding market conditions and also give rough estimate of payment for property letting. Property letting services agents contacts you with property details that may apply. They can also recommend good sample of apartments or flats for you to make the best judgment. If you have interest in a specific property advertised, you can take help of agents providing letting services. Letting services provider reduce your burden of searching and checking all details of property letting.
Points to consider before renting your property
1. Make sure to rent your property on competitive prices.
2. Being a landlord, you should have a time to handle issues with tenants at any time.
3. Have proper written rental documentation prepared.
4. You must know your responsibility as a landlord.
5. Be sure that are getting enough in rent to cover your mortgage, insurance and property repairs.
6. Do research and find the demand of rental homes in your area.
Redstones offer a range of property letting services to meet individual needs. Whether you are a landlord or a tenant, we can offer competitive and professional property letting services with a quick letting process. Redstones offers discount letting services to the landlords across the UK. We offer a Tenant Find Service and property management service for landlords at affordable price. We believe in providing ethical and quality property rental solution to landlords and tenants that would best suit their needs.
Mortgage Refinancing – What You Need To Know About Refinancing Your Mortgage
November 2nd, 2009 by adminWhen you go for mortgage refinancing loan you should know the following things in nutshell:
Mortgage refinance is like taking second loan to repay your first mortgage loan. Reason to go in for such a loan is that your first mortgage loan tenure is long, and the associated interest rates are very high. Now the interest rates have reduced heavily in the market. Before planning to take a mortgage refinancing loan be careful while doing online research, compare the interest rates and tenures of different lenders, and analyze the best option suitable for you. While taking second loan, do analyze how much cash you can avail after paying your first mortgage loan, which will help you in finishing off other expenses or liabilities you have in hand. Mortgage refinance loan is normally taken to replace the existing loan with a new loan with better terms and conditions as compared to the first one, which can help you save time and concentrate on your career. People basically go for a refinance mortgage loan for few reasons.
# To minimize existing interest rate on their existing mortgage loans, and lowering their monthly mortgage expenses.
# To get some money out of their mortgage or home loans for a house improvement project, to combine debts and pay them off.
There are other terms you need to consider when you go for refinance mortgage loans. What are the loan types and down payment penalties? It’s important to avail refinance loan quotations from lenders and make the correct decisions. The other reasons you may opt for mortgage refinance loan could be to get a sort-term mortgage loan of 10 or 20 years, which will help you to pay off your mortgage loan. You may like to switch from fixed rate mortgage to adjustable rate mortgage loans depending on which one is more beneficial to you. Following mistakes should be avoided while going for home mortgage refinance loan.
# Don’t take your county assessor’s value as a basis for refinance; try to find out the exact market value which could be higher than the county assessor’s value. If you consider the market value, you would get a higher value of mortgage loan which can help you in paying other debts.
# Not providing documentation promptly, can get your loan process delayed, which can result in your loan not being approved at the lower interest rates which you have agreed.
Even if you have a bad credit history you can easily get the bad credit home refinance from us. With a poor credit rating there can be a financial hindrance to many things we do in our life. When you have a bad credit rating you may not be able to buy a car, obtain a credit card, get a student loan, and, in some cases, even get certain jobs. You can, however refinance your home with bad credit mortgage refinance even if you have a bad score. You should normally know what your credit history and the actual score contains. It’s recommended you get the reports from all agencies and check the facts, if the reports contain wrong information then get the error corrected with the agencies, and get it rectified before applying for bad credit mortgage refinancing.
When you have bad credit history and you are applying for home mortgage refinance, care should be taken that the interest rates should be very low than the current home mortgage loans. A difference of 0.50 to 1% difference is not enough. There should be a difference of 2 to 3% in interest rates, when you apply for mortgage refinancing loan. Your new mortgage refinance loan interest rates should be lower than the existing ones. This can help you in getting more money in hand, and you can pay off your debts and have enough money in hand for redeeming other liabilities. When going for home mortgage refinance loan with bad credit or bad history be careful that the second mortgage refinance loan you take does not have a clause of pre-payment penalty ranging from 6 month to 2 years. That means if you want to end your home mortgage refinancing loan early, you can’t make any pre-payments as it will carry penalties.
You can apply through us for bad credit home refinancing if you have a bad credit history, you can fill our online form and we will get in touch with you as soon as possible to solve your queries.
Myths About Real Estate Agents
October 26th, 2009 by adminThere are some myths about real estate agents, many of which are not so flattering. But when it comes down to it, real estate agents are not too out there, and there is a logical explanation to each misconception. Let’s straighten out a couple myths and facts.
Myth #1: They have big hair.
Fact: Though occasionally real estate agents do have big hair, most are regular people who get up in the morning just like you do, and go to work just like you do. Many real estate agents, in fact, are going bald due to stress related hair loss. Same with the fancy dagger-shaped manicures; in actuality, many real estate agents have bitten their nails down to nubs.
Myth #2: Real Estate Agents drive luxury cars while talking on their cell phones.
Fact: It
What You Need To Know About Adjustable Rate Mortgages (Arm) – Loan Modification Help Center
October 24th, 2009 by adminEveryday we read about the worldwide financial crisis and, specifically, about the U.S. banking and housing crisis. To understand the challenges facing borrowers during the Housing crisis, it is critical to understand adjustable rate mortgages – how they work and how they can impact you.
ARMs offer both advantages and disadvantages. Unlike a fixed-rate mortgage, an ARM provides interest rates that change periodically – and payments that go up or down accordingly. At first, lenders generally charge lower interest rates for ARMs and this makes an ARM easier to afford initially. If interest rates remain steady or move lower, this can work to your long term advantage. It is important, however, to weigh the risk that if interest rates increase in the future, so will your monthly payments.
The initial rate and payment on an ARM will remain in effect for a limited period–ranging from several months to 5 years or more. After this initial period, the interest rate and monthly payment may change at regular intervals – every month, every year, every 3 years. This period between rate changes is called the adjustment period.
The interest rate on an ARM is determined by two things: the index and the margin. The index is usually a standard measure of interest rates and the margin is an extra amount that the lender adds. If the index rate goes up, so does your interest rate and monthly payment. On the other hand, if the index rate goes down, your monthly payment may go down. Not all ARMs adjust downward, however so be sure to read the details about any loan you are considering.
Lenders base ARM rates on a variety of indexes. You should ask what index will be used for your ARM, how it has fluctuated in the past, and where it is published.
The margin may differ from one lender to another, but it is usually constant over the life of the loan. The fully indexed rate is equal to the margin plus the index. For example, if the lender uses an index that is currently 4% and adds a 3% margin, the fully indexed rate would be 7%.
Some lenders base the amount of the margin on your credit record – the better your credit, the lower the margin. In comparing ARMs, look at both the index and margin for each program.
An interest-rate cap places a limit on the amount your interest rate can increase. Interest caps come in two forms: A periodic adjustment cap, which limits the amount the interest rate can be adjusted up or down from one adjustment period to the next, and a lifetime cap, which limits the interest-rate increase over the life of the loan. By law, virtually all ARMs must have a lifetime cap.
In addition to interest-rate caps, many ARMs limit, or cap, the amount your monthly payment may increase at each adjustment. A payment cap can limit the increase to your monthly payments but also can add to the amount you owe on the loan. This is called negative amortization.
If you are considering an ARM, ask yourself:
– Is my income enough–or likely to rise enough–to cover higher mortgage payments if interest rates go up? – Will I be taking on other sizable debts, such as a loan for a car or school tuition, in the near future? – How long do I plan to own this home? If you plan to sell soon, rising interest rates may not pose the problem they do if you plan to own the house for a long time. – Do I plan to make any additional payments or pay the loan off early?
Golden Rule: Before you consider any loan, ask questions and read the details. For information and news please visit Loan Modification Help Center
What you Need to Know About Property Taxes Before Buying a Home
October 21st, 2009 by admin1. Why is is important for potential home owners to know what the property taxes will be on a house before they buy it?
It is very important to potential home buyers to know about the property taxes on a house because:
- Most mortgage companies will make the property owner escrow the property taxes and therefore it becomes part of their monthly payment which needs to be factored in to access affordability.
- Property taxes can rise due to reassessment of value after a home is purchased.
- Property taxes differ from town to town which allows consumers to compare them to get the best housing value for their dollars.
2. What factors are used to assess property taxes?
Property taxes are commonly assessed based upon three factors:
-The assessed value of the home as determined by the local government tax appraiser
-The budget of the local government
-A mill rate ? a dollar amount assessed in tax for every thousand dollars of assessed value which is determined by dividing the total budget amount over the total assessed value amount of a town.
5 Tips Every Loan Modification Firm Talks About
October 11th, 2009 by adminHere?s a list of loan modification do?s and don?ts to help you avoid common pitfalls.
Do know your rights.
More than 80% of mortgage contracts violate one or more lending laws?and most of them go unnoticed. But these violations can be your biggest weapon in the loan modification process. They can give you the leverage you need to negotiate with your lender and stop foreclosure. Your loan modification attorney can help you understand your rights and use them to get the results you want.
Don?t wait too long.
The foreclosure process is designed so that you have time to get back on your feet and save your home. But that doesn?t mean it?s safe to procrastinate. The longer you wait, the harder it gets to get you out of that fix. As soon as you decide you need mortgage help, call for a loan modification help and get started.
Do work with your lawyer.
Your Home Loan Modification doesn?t rest in the hands of your lender, your broker, or your loan modification attorney. These people can help, but you have to do your part and cooperate with your lawyer. Make sure to submit your paperwork on time, answer questions honestly, and give them a clear picture of your financial situation.
Don?t file for bankruptcy, unless you really have to.
Many people think that filing for bankruptcy can help them stop foreclosure. But data from the American Bar Association shows that it doesn?t work that way. In fact, 96% of the people who file bankruptcy end up losing their homes anyway?so they?re left with a foreclosure AND a bankruptcy on their records. In some cases, bankruptcy is still a viable option, but don?t make any decisions without getting professional advice.
Do have a backup plan.
Not all people will qualify for a mortgage loan modification. Maybe you?ve fallen too far behind, your lender may be simply hard to work with, or maybe you don?t need it after all. In any case, it?s always good to have a Plan B. Your mortgage modification attorney can help you find the best solution.
If you can?t get your loan modified, talk to your lawyer about a short sale. This involves selling your home for less than its fair market value and giving the proceeds to your lender. Although you still lose your home, it?s not as damaging to your credit as foreclosure, so it?s easier to get back on your feet.
The Truth About Mortgage Rates
October 10th, 2009 by adminThe best rumors have the longest staying power, and the untruths about the connection between Bank of Canada interest rate cuts and mortgage rates is a prime example. Why? Well, though Bank of Canada interest rate cuts do affect the financial industry, they do not affect every segment of the financial sector; some segments are directly affected, others are only indirectly effected, and then there are segments that are directly or indirectly effected depending on the financial product. The mortgage industry falls into that third category.
Shocked? Well, you?re probably not alone. The idea that Bank of Canada discount rate changes cause mortgage rates to change is a common misconception that?s been perpetuated for years. So, let?s set the record straight!
TRUTH: When the Bank of Canada adjusts interest rates, it does affect interest rates of financial products. However, only interest rates for short-term financial products?things like car loans, credit cards, etc.?are directly affected by Bank of Canada interest rate cuts or hikes. Meanwhile, 10, 15, 30, and 40-year fixed mortgage loans are considered long-term financial products. As such, the Bank of Canada?s decisions do not directly influence fixed mortgage rates.
TRUTH: Though Bank of Canada rate cuts have no direct influence on fixed mortgage rates, the Bank of Canada?s decisions do directly sway one type of mortgage loan: Adjustable rate mortgages (ARM), which are also sometimes referred to as variable rate mortgages, IF the ARM is specifically stipulated as being tied to the prime rate.
TRUTH: Fixed mortgage rates are based on mortgage bonds (sometimes called mortgage securities), NOT the 10-year T-bill. Therefore, what actually has a direct effect on a mortgage rate increase or decrease is the buying and selling of mortgage bonds.
TRUTH: Though Bank of Canada rate changes do not have directly influence fixed mortgage rates, they can have a Domino Effect on fixed mortgage rates. How so? Well, the purpose of the Bank of Canada?s rate adjustments is often to increase or decrease consumer spending. For instance, when interest rates are cut, the goal is to increase consumer spending. As a result, investors speculating that the Bank of Canada?s tactic will work pull their money out of the bond markets (which are less volatile, low return investments) and put their money into stocks because they believe they can make greater profits from their investment. When this happens, that can cause mortgage rates to fluctuate. Remember: Mortgage bonds / mortgage securities affect mortgage rates. If money is cashed out from mortgage bonds, rates will increase. Conversely, if the monies are withdrawn from other types of bonds, mortgage rates may dip or they may remain unchanged.
So, what does all of that mean if you?re looking to modify or refinance your mortgage, or if you?re waiting for mortgage rates to change before you apply for a mortgage loan? First, it means that you should keep an ear out for what the Bank of Canada is doing regarding interest rate cuts and spikes ONLY if you?re interested in a variable rate mortgage?which would not be ideal for most consumers in the current economy. However, if you prefer a fixed rate mortgage, it means you can (and should) stop wasting your time tracking the 10-year T-bill and keeping tabs on the Bank of Canada. Instead, keep watch on what?s happening with mortgage bonds so you?ll know when mortgage rates are where you want them!
