15 Year Versus 30 Year Fixed Rate Mortgages – How to Determine Which is the Better Option

As mortgage rates continue to hover at 30 year lows, many people are wondering whether a 15-year or a 30-year mortgage term is a better option. After all, even though payments on the 15-year option would be higher, the lower interest rates on the shorter term loan are keeping payments, in many cases, at very manageable levels.

With the average 15-year interest rate near 3.5 percent for those with good credit, versus around 4.5 percent for a 30-year mortgage, it’s hard not to at least consider the shorter term mortgage option. Further the higher payments, lower interest rate, and shorter repayment term of the 15-year mortgage option allows people to pay down their principal much faster, too.

Apparently quite a number of homeowners have jumped to 15-year mortgages lately. In fact, according to data from CoreLogic, for the first half of this year, over 25 percent of homeowners who refinanced went with a 15-year option. This is a drastic increase over past years, when only about 9.4 percent of home owners went that route.

Read more

Solving the Housing Foreclosure Crisis by Cutting Mortgage Principal Balances – Big Mistake

Mortgage interest rates are at their lowest point in decades (about 4.5%) and the housing credit has been in effect for more than three years, yet the housing market is tepid at best, with foreclosures at record highs and government housing institutions having to put more distressed assets on their books. This has spurred rumors around the web that the Obama administration (via the Treasury) will soon be asking government owned entities Fannie Mae and Freddie Mac to expand their “save the economy” effort by reducing the principal balances for those individuals struggling to pay their mortgage payments.  Keep in mind that the President does not need congressional approval for this change because 1) the government already “owns” Fannie and Freddie and 2) the Treasury has removed the previous limits on the amount of money the organizations can tap into (it was $400 Billion, now – no limit).

Unlike most rumors, this one became more, not less, plausible when you examine the details. The White House has made it clear in recent months that it is frustrated by what the Framers called “the legislative branch,” what President Obama calls “politics” and what I call “the wishes of the American people.” Obama craves a short-term sugar rush for the economy. If he feels cornered, betrayed and alone, he could use his new ownership of Fannie Mae and Freddie Mac as a free federal candy store and tell America to line up and pig out. In more ways than one, Barack Obama seems to want to be known as the Sub-Prime President. (source : New York Post)

While this plan may help a handful of borrowers on the edge of foreclosure, there are many more  fundamental problems with  reducing the principal home loan balances which include:

Read more

New Bills for 2010 Home Buyer Credit and Unemployment Insurance Extension

The home buyer credit, extended and expanded over the last 3 years is set to expire at the end of this month with Congress still unable to approve the extension as part of HR 4213. However, recently released data for May 2010 shows worrying trends of sharply declining sales of existing and new homes. Further, inventory data and foreclosure activity have not shown any signs of improvement. All this suggests that the expiration of the home buyer credit may have more of an impact than people thought.

This has prompted Congress to take more action with the stalling of the HR 4123 bill in Congress, due to other provisions. As such 2 new bills have been introduced to try and extend the home buyer credit and also unemployment insurance – 2 key bills that Congress is likely to approve given their importance to their constituents. These bills are:

Read more

Saving Money With a Government Backed Mortgage Through VA, FHA or USDA Loans

The market for government loans is skyrocketing. More and more families are ready to settle down in their dream home, and government-backed mortgages seem like a way to make home ownership happen quickly and easily. Three loans programs in particular have become buyers’ favorites throughout the last few years: VA, FHA, and USDA loans. Whether you want to live in the big city or in the country, each loan has a variety of unique benefits and opportunities. So, let’s look at what these three major loan programs have to offer.

Read more

Taxes and Capital Gains When Selling My Home

Following my recent post on Tips for Selling your Home, I received a reader email asking me to clarify the tax consequences of selling their home and what the potential liability/capital gain implications would be. Based on what the IRS says, here are the key tax facts to keep in …

Read more