Hawaiian Expression of the Day
“Paki kepau o’o ka ‘ulu”
“The gum oozes. The breadfruit is ripe.” I.e., “The fruit is ready to pick.”
(Sometimes said of a young person reaching maturity and about to leave the nest or learn a trade.)
Rates are way down!
The average 30-year fixed rate has dropped to 3.9%, with well-qualified buyers getting even lower rates than that. Interestingly, the same rate also applies to “jumbo” loans – (loans that are above the standard $484,350 conforming limit).
That’s unusual in our high-priced market, where jumbo loans are routine and average house prices in most areas are well over the conforming limit.
More people are choosing to lock in today’s low rates with a 30-year fixed mortgage, too, rather than leave anything to chance with an adjustable rate mortgage.
FHA borrowers are getting a great deal, too: The average rate for 30-year fixed rate FHA-backed mortgages fell by 4/100ths of a percentage point to 3.75%. For 15-year FHA mortgages, the average interest rate fell last week to 3.35%. If you want to build home equity fast, or pay off your home as quickly as possible, the 15-year fixed may be a terrific way to go. With the average contract coming back at 3.35%, this may be the mortgage opportunity of a lifetime.
As always, not everyone will qualify for those rates. Mortgage underwriters base rates on a variety of factors: Some people will get offers a little lower, and some borrowers will get offers a little higher. Borrowers with higher than average debt-to-income, with below average credit, or with other negative factors will usually not get the best offers available.
If this describes you, it’s important to come in with reasonable expectations. But the good news is this: Today’s rates are near historic lows for people at all credit tiers. We’re routinely able to find great home loans for all kinds of people – even people with some credit issues. And most applications get approved.
So if you can benefit from refinancing at these low rates, don’t be shy about applying. Now’s the time to strike.
You may benefit from refinancing – even if you bought or refinanced last year!
Many people who bought or refinanced as recently as a year ago are taking advantage of the opportunity this month. The savings are often worth the effort.
According to the 2017 Quarterly Consumer Debt Report from the Hawaii Department of Business, Economic Development and Tourism, the average mortgage balance in Hawaii reached $282,608 that year. That’s more than 68% higher than the average mortgage balance in the rest of the country, according to the DBEDT.
If your balance is close to this number, refinancing at today’s low rates may be able to reduce your monthly payments substantially.
Suppose you’re carrying a mortgage of $282,608 – the average balance for Hawaii homeowners. Suppose further that you have 15 years left on the loan at 6 percent interest. Your basic monthly payment should be around $1,413.07.
If you can refinance it at 4 percent, keeping the same remaining term, you’ll reduce your mortgage payment to $942.74.
That’s a savings of $470.33 per month.
If we assume 3% in closing costs, that would amount to $8,478.74.
Your total savings over the life of the loan would be $76,180.77. And you’d recoup all your closing costs in 19 months.
That’s more than 13 years of savings.
Everyone’s situation is different, of course. But you can perform a rough estimate of the amount you may be able to save each month using this calculator. Or contact us today and we will help you with a personalized analysis.
What about adjustable-rate mortgages?
The average contract interest rate for 5/1 ARMs dropped to 3.25% from 3.42%. The expression “5/1” means that interest rates are fixed for 5 years, and then will readjust every 1 year after that based on prevailing interest rates. If interest rates fall, so will your payment. If interest rates rise, so will your payment.
But with a lower interest rate, more of your payment each month will go to principal, rather than interest. This is especially true for shorter loan terms (15 years instead of 30). So if you keep up your payments, you will build equity much faster than you would in a longer loan term or at a higher rate.
It’s also a great time to buy!
Nationwide, mortgage applications for home purchases are up strongly this month, too, compared to year-ago figures. Purchase applications for the first week of October were 10% compared last year, according to the Mortgage Banker’s Association.
Again, if you can afford the mortgage and insurance without destroying your lifestyle, don’t be gun shy about applying for today’s great rates. Nationwide, only about 14.6% of completed applications for home purchases are getting turned down. If your debt-to-income ratio and credit history are at least reasonable, chances are very good we can help you climb on the property ladder with a home loan you can live with.
If you’ve been on the fence about purchasing or refinancing a home, don’t miss this manawa kūpono — this tremendous opportunity! Call Pacific Home Loans today at (808) 891-0415. Or fill out our convenient online application here, and we’ll follow up with you.
Whether it’s saving potentially hundreds of dollars per month by refinancing, purchasing a first home or a dream home, we’re ready to help you get it done. Call Pacific Home Loans today to lock in today’s great rates!
Mahalo form all of us at Pacific Home Loans.