Mortgage Rate Survey April 27, 2010
Mortgage rates moved mostly sideways during the past week based on the most recent survey of mortgage rates performed by Finidlocalmortgagerates.com. The average rate on a 30 year fixed rate home loan came in at 5.10% which is down from the prior week’s average 30 year fixed rate of 5.125%. While the base mortgage rate was down, the points charged to obtain this rate was up slightly. The average points charged on a 30 year fixed rate loan moved up from 0.375 points in the previous week to 0.500 points for the current week.
The average rate on the 15 year fixed rate home loan displayed a similar split in rate and point movement with the rate falling and the points charged increasing, though the rate decrease on the 15 year was more pronounced than that of the 30 year. The average 15 year fixed rate home loan came in at rate of 4.45% which is down from last week’s average rate of 4.60%. The points charged on average for the 15 year fixed rate loan was up modestly from 0.40 points to 0.45 points.
The top five mortgage lenders in this week’s survey included Chase Mortgage, Wells Fargo Home Loans, Citibank, Bank of America and US Bank. These bank mortgage lenders are also the five largest banks in the U.S. based on assets. The following data contains the results of the survey for these mortgage lenders on the 15 year and 30 year home loan products.
Chase Bank Mortgage offers the 30 year fixed at 5.250% and no points with a 5.307% APR. The 15 year fixed rate home loan from Chase is at 4.625% with no points and a 4.721% APR.
Bank of America Home Loans has the 30 year at 5.000% with 1.0 point and a 5.136% APR. The 15 year at B of A is at 4.250% and 1.25 points with a 4.518% APR.
Citibank markets the 30 year is 5.125% with 0.50 points and an APR of 5.386%. Citibank markets the 15 year with a mortgage rate of 4.625% and no points resulting in a 4.910% APR.
Wells Fargo home Loans is offering the 30 year at 5.000% and 1.0 point for a 5.191% APR and the 15 year at 4.250% with 1.0 point and a 4.573% APR.
US Bank has a 30 year fixed home loan at 5.1250% and no points with a 5.192% APR while the 15 year at US Bank is at 4.250% with no points and a 4.612% APR.
Many other mortgage loan options are available from these mortgage lenders including additional rate and point options for the loan types listed. The loan rates listed are for home purchase transactions, refinance rates may vary from purchase rates.
The mortgage rates, points and APRs listed are subject to change. The mortgage rates, points and APRs in the survey are for a home loan of between $200,000.00 and $275,000.00 on a single family owner occupied home with a minimum 20% down payment. These mortgage rates are believed to be accurate and current as of the date of this publication. Mortgage interest rates are not guaranteed.
For additional information on these mortgage rates, the mortgage lenders can be reached directly at the following numbers:
Chase Bank 800-873-6577
Bank of America 888-233-4124
Citibank 800-667-8424
Wells Fargo 877-937-9357
US Bank 888-831-7524
Mortgage Closings and Per Diem Interest
Many home loan borrowers are confused about a charge on their mortgage loan closing statement referred to as per diem interest. Part of the confusion stems from the fact that this charge is referred to as a closing cost on the good faith estimate provided to the borrower.
Per diem interest means the amount of daily interest payable under a home loan. The mortgage lender needs to calculate per diem interest in order to determine the amount of interest payable by a borrower at the loan closing.
At the loan closing, this will the daily cost of interest form the time the funds are disbursed to either purchase the home or after the three day right of rescission on a mortgage refinance to the time period when the mortgage interest starts to accrue for the first payment.
Most all home mortgages have loans monthly payments that cover a 30 day period of time due on the first of the month. A borrower’s first monthly payment is typically due the first day of the second month after closing. For example, if a loan closes on January 15, then the first monthly payment will be due on March 1 not February 1.
Interest paid on home loans is payable in arrears, using the above payment date example, the March 1 monthly payment will cover interest which accrued during the month of February. Normally, rent payments are calculated another way and are forward payments, the March 1 payment covers the rent for the month of March not February.
Following this same example, the borrower that would close on the home loan on January 15 has their first monthly mortgage payment due on March 1, whether the loan was a refinance or for a purchase. The borrower has a payment due on March 1st that covers all of February’s interest charges and any principal due, but the borrower had access to the funds from the time it disbursed in mid January. To cover the interest charges from January 15 to the February 1st, at the closing the borrower will have to pay interest covering that period from January 15 through January 31 since this interest will not be included in the March 1 monthly payment.
Per diem interest is determined by first multiplying the principal amount of the loan by the interest rate to determine the annual amount of interest payable under the loan. Next, the annual amount is divided by 360 days to determine the per diem interest amount (note mortgage lenders typically calculate per diem interest based on a 360 day year; when calculating per diem interest it always divided by 360 days unless the mortgage lender specifically instructs otherwise). Finally, the per diem interest amount is multiplied by the number of days remaining in the month of closing, including the date of closing.
For example assume that a loan with an original principal amount equal to $100,000 and an annual mortgage interest rate of 7.00% is funded on January 15. To determine all charges at the closing, the mortgage lender must determine the amount of per diem interest which will be payable by the borrower at closing.
The total annual interest is equal to $7,000 or 100,000 x 7%. This is interest for the year and therefore has to be divided by 360 to obtain the daily interest of $19.44. This figure is now multiplied by the 15 days remaining in the month to come up with a total interest charge of $291.60.
This charge will be depicted as a closing cost on the settlement statement but this would seem like a misnomer. The interest charge is simply the cost of having access to that money before the first mortgage payment, referring to interest charges as a closing cost in the same general category as origination fees can appear confusing.
NY Mortgage Rates at Ridgewood Savings Bank
Ridgewood Savings Bank is headquartered in New York and has been offering banking products and services in New York since 1921. Among the many bank products and services offered by Ridgewood Savings Bank are a variety of consumer loans and home loans.
Ridgewood Savings Bank offers mortgage loans with fixed rates, adjustable rates and loans for mixed use properties. Home loans come with no application fee, there are options for no point mortgage originations and applicants can lock in a mortgage rate for up to 60 days with an option to float down to a lower mortgage rate should the mortgage market improve and the opportunity to lower the rate become available.
With a fixed rate mortgage from Ridgewood Savings Bank, a home loan borrower
knows the exact amount of the monthly principal and interest payments over the life the loan. Borrowers can choose terms ranging from 10 to 40 years. Current mortgage rates for fixed rate loans include:
Fixed rate mortgages offered by Ridgewood Savings Bank includes:
Conventional fixed rate mortgage with a 10 year term has a rate of 4.625% with 0 points and a 4.63% APR.
Conventional fixed rate mortgage with a 15 year term has a rate 4.625% with 0 points and a 4.63% APR.
Conventional fixed rate mortgage with a 20 year term has a rate 5.375% with 0 points and a 5.38% APR.
Conventional fixed rate mortgage with a 25 year term has a rate 5.50% with 0 points and a 5.50% APR.
Conventional fixed rate mortgage with a 30 year term has a rate 5.50% with 0 points and a 5.50% APR.
Ridgewood Savings Bank’s adjustable rate mortgages can offer an initial lower initial interest rate. With lower initial mortgage rate, the monthly payment will be lower in the early period of the loan. These loans also have interest rate caps at each adjustment period that limit the potential increase in mortgage payments. Current mortgage rates for adjustable rate mortgages include:
3/3 adjustable rate mortgage based on the LIBOR rate is 4.375% with o points and a 3.50% APR.
1/1 adjustable rate mortgage based on the one year Treasury bill is 4.875% with 0 points and a 3.27% APR.
3/1 adjustable rate mortgage based on the one year Treasury bill is 4.375% with 0 points and a 3.41% APR.
The annual rate cap on 1/1 through 5/1 adjustable rate mortgage products is 2%. The annual rate cap on 3/3 adjustable rate mortgage product is 2%. The lifetime cap on all adjustable rate mortgage products is 6% above the initial mortgage interest rate.
Ridgewood Savings Bank, rates displayed are available for owner occupied properties located in the five boroughs of New York, Nassau, Westchester, Suffolk, Putnam, Rockland and Fairfield Counties. Rates and terms are subject to change. Mortgage loans require bank approval and additional conditions will apply. For current mortgage rates and loan information, a bank representative can be reached at (866)-772-4111. Additional home loan products are available.
Mortgage Buydowns
A buydown is a mortgage loan with a below market mortgage rate for a period of time that usually lasts one to three years. The buydown is a temporary reduction in the mortgage interest rate on the home loan that is paid for by paying additional points at the time of the mortgage loan closing. The buydown mortgage loan is created by having the homebuyer or another third party, often the seller or a home builder, making a subsidizing payment to the mortgage lender so that the buyer’s mortgage rate and, therefore, monthly mortgage payment are lowered. The buyer may incur the costs of the additional points or subsidy or the seller may foot the bill for the additional points or the mortgage lender can structure the buy down and fund its with a higher mortgage rate immediately preceding the buy down period over the life of the loan.
A mortgage buy down is a more popular home loan product used by builders in large subdivisions and by sellers in a slow sales market. A borrower may want to buy down mortgage rates because they have cash on hand, expect their earnings to go up, but need a lower monthly mortgage payment in the present. The monthly mortgage payment during the buydown is a fully amortizing principal and interest mortgage payment.
In a mortgage buydown, buyers are essentially paying cash up-front for points, and receiving a reduced mortgage interest rate in return. However, the buy down is only a temporary reduction in the mortgage rate. Typically, mortgage buydowns last from one to three years after the home loan is closed. Each year the mortgage rate will rise by a predetermined amount and the mortgage rate increases will only occur for the two or three years, depending on the type of mortgage buy down.
Each point equals one percent of your total loan amount. For example, 2 points on a $ 100,000 loan will cost $ 2,000, or 2% of the loan amount. The more mortgage points paid for the subsidy, the lower the interest rate will be. If these points can be paid for by the seller as an inducement for the seller to close the transaction, this can be a valuable tool. The mortgage lender may fund or structure the buydown by charging a higher interest rate over the life is loan, this is not very common as the mortgage lender has to protect against early payoff since their compensation for the lower initial mortgage rate is a higher than market rate in the later years of the mortgage loan.
For some borrowers a mortgage rate buydown is more advantageous than choosing an adjustable loan with a payment option that allows for negative amortization like an Option ARM. That’s because with mortgage buydown programs your mortgage payment always includes principal and interest. This means every time you make a payment your mortgage balance grows smaller instead of bigger. The prospect of experiencing negative amortization is always a must to avoid. In addition, the mortgage rate increases for a buy down are predetermined and not market influenced once the mortgage loan is signed.
A typical mortgage rate buydown looks like this:
Payments are reduced and figured on a mortgage rate over a specific term of a few years. The difference between the real interest rate and the lowered interest rate is paid in cash by the seller or sometimes the buyer. It’s like putting $1200 in the bank and withdrawing $100 every month for 12 months to help make your mortgage payment.
One popular buydown is called the 2-1 mortgage buydown. This is a 30-year fully amortized mortgage where the interest rate increases 1% every year for the first two years, at which point the interest rate is fixed for the remaining home loan term.
As an example, consider that your mortgage amount is $350,000 and the interest rate is fixed at 6.75% for 30 years. The buyer or seller will buy down the mortgage interest rate by paying a lump sum.
Here is how the mortgage interest rate would work out over the term of the loan.
First year mortgage interest rate is 4.75%
Second year mortgage interest rate is 5.75%
Years three through 30, the mortgage interest rate is 6.75%
It keeps payments low for 36 months for borrowers whose income is expected to later increase or intend to change the home loan or ownership in the future. The borrower qualifies for this home loan at the 4.75% interest rate and payment amount.
The 3-2-1 buydown mortgage is another version of a 30 year mortgage rate buydown. The interest rate increases 1% every year for the first three years, and then the interest rate is fixed for the remaining term.
These home loans are most advantageous when the seller pays for the buy down. The most common transactions where the buy down is used are on new homes or new construction. In these cases, the builder is willing to pay points to induce the buyer with lower monthly mortgage payments and a lower mortgage rate. Home builders generally prefer to provide incentives to prospective borrowers rather than make absolute reductions in the price of the home.
The bottom line on these mortgage products is that with the buy down you are able to drop the mortgage rate and monthly mortgage payment on your home loan without incurring the risks associated with of an adjustable rate mortgage or interest only home loan.