Keith Gumbinger
Keith Gumbinger
additional continue debts exceed guarantees home levels prices quickly rates remain value
Not only do you not own any of your home, but you may be piling up additional debts that could quickly exceed the value of the home. There are no guarantees that rates will remain at comfortable levels and no guarantee that home prices will continue to go up.
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It doesn't sound like either of them got a particularly good deal.
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If you pay points up front, it's harder to get your money back. When rates are high, borrowers have to pay points to trim rates any way they can, but with rates so low there is really no need to pay those points.
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If you're the gambling sort, you could get into an interest-only product and bet that the market will build equity for you.
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In many markets, it's possible to borrow at prime or even a quarter to a half a percentage point below prime.
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This is very popular right now because it lets you draw some money out of your home and improve cash flow. If you do this, resist the temptation to draw too much equity out of your home.
interest lock optimal
The optimal thing to do is to lock in your interest rate.
allowing declining housing interest rate rising risks today together top
What is new today is that lenders are allowing for the layering of risks on top of one another. What we don't know is what if we put all these risks together and put them in a rising interest rate environment, a declining housing market, or a weakening economy.
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Whenever business slips a little, lenders trot this stuff out.
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This would free up cash now, while still minimizing their exposure to rising rates during the period they expect to remain in the house.
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The question you need to ask yourself is, why would a bank be pitching you this product at this time? The obvious answer is that bankers believe rates will rise in the future. Getting you out of a fixed loan and into a variable one helps ensure profitability on your account.
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With rates as low as they are people can cut years off the mortgage for the same monthly payment.
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There are a variety of methods by which bridge loans are made.
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Welcome to the cold reality. A lot of people selected short-term interest rate product and are now beginning to see how these things benefit the lender.