Refinancing your home loan can save thousands in interest payments
Aug 2011 22

Dan Green, mortgage broker extraordinaire, does the analysis of mortgage rate changes since earlier this year to show how refinancing your home loan could save you thousands of dollars in interest payments.

As a homeowner, your “total cost of homeownership” is tied to your mortgage. The higher your mortgage rate, the more interest you pay over time. And regardless of your mortgage interest tax-deductibility, over 30 years, mortgage interest accrues into something fierce .

Lately, though, with mortgage rates down, those long-term interest costs have plunged.

- April 2011 : Over 30 years, a new $300,000 mortgage accrues $276,000 in interest
- August 2011 : Over 30 years, a new $300,000 mortgage accrues $227,000 in interest

Check out his site for more information and contact your local mortgage lender to learn more.

Proposal would lower mortgage rates to 4% for millions of homeowners
Aug 2011 18

Finally, something we can all agree on? :)

According to Scott Van Voorhis over at, two Columbia Business School professors have a bold proposal for fixing the nation’s housing market problem and the US economy.

R. Glenn Hubbard, dean of the Columbia Business School, and Chris Mayer, a professor of finance and economics and the school’s senior vice dean, would like to refinance 30 million mortgages across the country down to a once unimaginable 4 percent.


You can only see their proposal as a theoretical one; there’s no way that this could come to pass. And, they’re not the first to come up with the idea. (Even I was talking about this exact thing, last weekend!)

There are great benefits to doing this. Mr. Van Voohris says the professors estimate it would free up $60 billion in cash that consumers would (hopefully) spend.

But, even if the majority put the difference in savings into savings, isn’t that a good thing?

The program would reward responsible owners, for once, so it would be mostly met with approval from the American public – and what politician could be against that??

Bond holders have always recognized that there is a risk that their loans will be called. That’s all that would happen here. The loans would be redeemed and replaced with loans at lower rates. Since no one’s done a complete analysis on this, it’s hard to know who this would affect and how.

(The US Government should be redeeming and reissuing all its long-term treasury debt anyway, btw.)

I don’t necessarily agree that housing in Greater Boston is “over-valued”; as a percentage of household income, taking out a $400k loan this year would cost you less than any time since at least 1990.

I agree; picking “losers” and “winners” shouldn’t be the job of the government. The free-market should decide.

People’s opinions on this idea probably vary based on whether or not they stand to gain.

Free condo fees program offered through Freddie Mac
Aug 2011 16

Freddie Mac, which holds the keys to hundreds of thousands of homes that have been lost to foreclosure, has announced a new program that may entice people in the market for a new home to make offers.

HomeSteps, the real estate sales unit of Freddie Mac, today announced “Condo Cash”, a special limited time offer that will provide eligible condominium buyers with up to $1,500 for standard condominium association dues.

HomeSteps’ Condo Cash is limited to buyers who submit offers between August 15 and November 15, 2011 and close escrows on or before December 30, 2011. HomeSteps’ Condo Cash offer is valid only on HomeSteps homes that have been on the market for at least 120 days and are sold to owner-occupant buyers.

A two-year Home Protect® limited home warranty that covers electrical, plumbing, air conditioning, heating and other major systems and appliances is offered on some eligible HomeSteps homes. Home Protect also provides discounts of up to 30 percent on the purchase of appliances.

For complete terms and conditions, visit

Massachusetts’ housing affordability at 20-plus year low
Aug 2011 12

An analysis of historic housing prices and 30-year mortgage loan rates proves that housing is affordable to more Massachusetts’ home-buyers than at any time in at least 20 years.

I plotted the Standard & Poors / Case-Shiller home price index data for every month and year from January 1987 to May 2011. A rough estimate of what homes were worth in the past, and as good as any data for an analysis of this sort.

Then, I used data from the HSH historic mortgage rates website to plot average 30-year fixed-rate mortgage loans for each month during the past 24 years.

In May 2011, the median single-family home sold in Massachusetts for $304,000, according to The Warren Group. Working backward using the S&P / Case-Shiller values, I was then able to estimate what a single-family home sold for in every other month, from 1987 to today. (Case-Shiller normalizes January 2000 to have a value of 100, with dates before and after that adjusted.) (Case-Shiller and The Warren Group use different data; The Warren Group is for all of Massachusetts, whereas Case-Shiller is the “metropolitan statistical area” around Boston. The Warren Group’s values are probably lower than Case-Shiller, since they use homes in western Massachusetts, whereas Case-Shiller is more eastern Massachusetts, plus as far north as New Hampshire.)

I pulled median household income data from the US Census Bureau. (None of my figures are adjusted for inflation, which makes sense, since your pay in 1990 had to buy a home in 1990 dollars.)

What does my analysis show?

In 1990, the median home sale was for $146,503. This equated to $1,026 per month in mortgage loan payments at a fixed-rate loan at 9.98%. The median household income was $36,952, so you’d pay 33.34% of your annual income on your loan (assuming a 20% down payment).

In 2000, the median home sale was for $201,351. This equated to $1,218 per month in mortgage loan payments at a fixed-rate loan at 8.32%. The median household income was $50,502(!), so you’d pay 28.94% of your annual income on your loan (assuming a 20% down payment).

In 2009, the median home sale was for $303,496. This equated to $1,425 per month in mortgage loan payments at a fixed-rate loan at 5.80%. The median household income was $64,057, so you’d pay 26.69% of your annual income on your loan (assuming a 20% down payment). (Unfortunately, I don’t have 2010 or 2011 median household income data.)

The key figure, obviously, is the interest rate. It’s come down from double-digits in the 1980′s. It’s at almost an historic low.

For those who are in the position to buy right now, it’s a golden opportunity to lock in the cost of housing for years into the future, for the cheapest amount possible in over two decades.

Mortgage loan rates skirt historic lows; Boston rates low, too
Aug 2011 11

Mortgage loan rates dropped again, this past week, skirting the lowest rate, ever.

The average 30-year, fixed mortgage rate decreased to 4.32%, according to the Freddie Mac weekly survey of loan providers.

The 30-year fixed-rate mortgage (FRM) averaged 4.32 percent with an average 0.7 point for the week ending August 11, down from 4.39 percent, last week. Last year at this time, the 30-year FRM averaged 4.44 percent, so rates are lower.

A $400,000, 30-year, fixed-rate mortgage at 4.32 percent would run you approximately $1984 per month in loan repayments. This is down from $2,000, last week, $16 per month less, and $12 less per month compared to last year, when it would have cost you $2,012 per month.

Frank Nothaft, vice president and chief economist at Freddie Mac says, “Renewed market concerns about the European debt markets led investors to shift funds into U.S. Treasuries, pushing long-term yields lower. Further, in its August 9th Federal Open Market Committee statement, the Federal Reserve noted that economic growth so far this year had been considerably slower than it expected and that overall labor market conditions had deteriorated in recent months, leading the Committee to conclude that an exceptionally low federal funds rate should be maintained at least through mid-2013. These developments helped to ease mortgage rates lower this week.

“Lower mortgage rates will help to maintain the high degree of home-buyer affordability in the market. The National Association of Realtors┬« reported that its affordability index over the past three quarters has indicated the highest affordability since the inception of the index in 1970.”

If you’re considering a home purchase this fall, now is the time to speak with a mortgage broker.

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