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Article taken from FEDWEEK-Financial Planning and Retirement. Prepayment Puzzle When you buy a house you should make a down payment of at least 20 percent. If you make a smaller down payment you'll probably have to pay for private mortgage insurance (PMI), which is expensive. Once you have a mortgage, you can make larger-than-required payments. Any excess will decrease the amount you owe and thus decrease the mortgage interest you'll be paying. Prepaying a mortgage is virtually the same as investing at your mortgage rate, after-tax. Suppose, for example, you have an 8 percent mortgage and your effective marginal tax rate is 40 percent. Prepaying a mortgage would be the equivalent of investing at 60 percent of 8 percent, or 4.8 percent. You can substitute prepaying a mortgage for part of your fixed-income investment strategy. That is, some of the money that would have gone into Treasury or municipal bonds can go into mortgage prepayments, instead. Try to get your mortgage paid off by the time you retire so you won't have to keep making those monthly payments. Pass this on--- New Program will help first time homebuyer's in Avondale. Call me for further information. Contact info is at bottom of this message. Today's Interest Rates Conforming 40 yr Fixed------ 6.875% Conforming 30 yr Fixed-------6.625% Conforming 20 yr Fixed-------6.625% Conforming 15 yr Fixed-------6.125% FHA 30 yr Fixed------------------6.500% VA 30 yr Fixed--------------------6.500% FHA Jumbo-----------------------6.750% Reverse Mortgage for those 62 years or older-----Fixed HECM 6.06% Credit and LTV restrictions apply. Rates are subject to change daily. Equal opportunity lender Bond Market News for today Mortgage Bonds opened lower this morning, after the news that the Korea Development Bank may be interested in acquiring Lehman Brothers. This news added confidence to the financial sector, and traders responded by moving money from Bonds into Stocks. Also this morning, Fed Chairman Ben Bernanke will speak on financial stability at an annual meeting of the world’s top central bankers. As always, his comments could move the markets. Mortgage Bonds a low of the day. With negative technical signals, Ben Bernanke speaking on Inflation, Oil trading lower & Stocks rallying - Money flowing out of Bonds. Bonds now trading below support at 50-Day Moving Average. My advice is to Lock your loan. I will let you know if anything changes. Today's Quote I've been on a diet for two weeks and all I've lost is two weeks. Totie Fields |
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