Fixed interest – Bobs Birdhouse http://bobsbirdhouse.com/ Mon, 10 Jan 2022 03:49:17 +0000 en-US hourly 1 https://wordpress.org/?v=5.8 https://bobsbirdhouse.com/wp-content/uploads/2021/06/cropped-icon-32x32.png Fixed interest – Bobs Birdhouse http://bobsbirdhouse.com/ 32 32 How banks can profit the taxpayer as COVID quantitative easing ends https://bobsbirdhouse.com/how-banks-can-profit-the-taxpayer-as-covid-quantitative-easing-ends/ Sun, 09 Jan 2022 18:00:00 +0000 https://bobsbirdhouse.com/how-banks-can-profit-the-taxpayer-as-covid-quantitative-easing-ends/ There really is no such thing as a free lunch. I will explain why. In March 2020, the federal government announced that Australia was facing health and economic crises. Both have cost the country dearly. But one aspect of the economic response seemed too good to be true. As the crisis unfolded, the Reserve Bank […]]]>

There really is no such thing as a free lunch. I will explain why.

In March 2020, the federal government announced that Australia was facing health and economic crises.

Both have cost the country dearly.

But one aspect of the economic response seemed too good to be true. As the crisis unfolded, the Reserve Bank announced that it was embarking on a money-printing program, also known as quantitative easing.

It is an unconventional policy, with a country’s central bank creating new money to buy government bonds from commercial banks.

The process stimulates the money supply, lowers interest rates and prompts commercial banks to increase their lending.

I wonder though, have you ever wondered who would end up having to pay for this program?

Everything has a price in the end, it’s only a matter of time.

If interest rates rise, the Reserve Bank will start paying billions in interest to banks.(ABC News: Michael Janda)

The RBA and the economic bailout

The Reserve Bank has a vital role to play in helping run the economy at all times, let alone a single pandemic.

Its set of policies over the past two years has been comprehensive, but there are two aspects of this policy toolkit that concern you directly.

The first is that it has kept its cash rate target at the all-time low of 0.1% since the onset of the economic crisis.

The second is that he literally typed extra zeros on his computer terminals at his head office in Sydney’s Martin Place in order to create the money with which he bought billions of dollars in government bonds every week from the commercial banks – now totaling over $ 320 billion.

It is quantitative easing.

As a result, commercial banks have fewer bonds on their books and more money to lend (money received by the RBA) – and an incentive to do so since they only earn 0.01% on that at the end of the day. Reserve bank.

But what is the cost?

Here is the thing. Tens of billions of dollars of bonds are still held by the Reserve Bank and the money used to pay them into commercial bank accounts with the RBA.

What if, what if, the interest rate on the commercial bank’s deposit account with the RBA (foreign exchange settlement account) increases?

Of course, the Reserve Bank would have to pay the additional interest to the commercial banks.

As of Wednesday, December 29, trade settlement balances stood at $ 428.7 billion.

Independent economist Saul Eslake has studied the Reserve Bank’s financial accounts in detail.

“Before COVID, the Reserve Bank paid around $ 1 billion in interest, mostly to banks, on their foreign exchange settlement (ES) balances.

“[Those] balances were generally less than $ 30 billion at all times.

“He was getting around $ 2 billion a year in [coupon payments] on its bond holdings.

“[But now] the interest the bank pays on its very large ES accounts has fallen to almost zero.

“[The RBA] will likely earn even more interest on its large bond holdings, at least for a while, than it has to pay the banks interest on their ES balances, but it is clear that the Reserve Bank’s continued profits of this interest rate differential will decrease [as interest rates rise]. “

This means that, as the interest rates on those deposits rise enough, the Reserve Bank would start paying banks billions in interest – just like a bank pays you interest on your deposit account.

“It is conceivable that the Reserve Bank could start recording losses because of the narrowing of the gap between what it receives and what it pays,” he says.

What Mr. Eslake is saying is that the Reserve Bank is currently making money through its bond buying program, but once interest rates start to climb the bank may start to rise. bleed money by paying more to commercial banks than it receives from governments in terms of income from its bond holdings.

Space to play or pause, M to mute, left and right arrows for search, up and down arrows for volume.

Play the video.  Duration: 2 minutes 15 seconds

RBA Says Rates Won’t Rise Until 2024

What if RBA starts to bleed money?

The Reserve Bank, like any bank, is a business.

When it suffers losses, it seeks to “recapitalize” or seek debt and equity (more money) to maintain its stable position.

One “investor” the RBA relies on is the government, according to former Treasury economist Warren Hogan.

“Yes [the RBA’s] the losses are quite significant, they destroy their profits and also their reserves, they will have to be recapitalized, ”he said.

“These are government funds.

“It will be an appropriation of general government revenues.”

In a rising interest rate scenario where the RBA suffers enough losses under its bond buying program, the government would have to use taxpayer funds to recapitalize the bank.

You, the taxpayer, would start paying for the spinoffs of the RBA’s printing money program.

This is not happening yet. But 2022 is shaping up to be another tough year globally and the RBA has a lot to juggle.

What are the possible damages?

Short answer? Billions.

“The Reserve Bank’s exposure to the underlying financial system is far greater than it has ever been in its history,” Professor Hogan said.

“If interest rates change, then the Reserve Bank’s exposure to it would easily measure in the billions or even tens of billions.”

The Reserve Bank has helped the economy with its money-printing program, but as Professor Hogan says, “quantitative easing doesn’t mean debt is eradicated, it just means you don’t. to immediately appeal to the private sector for these funds “.

“The debt will have to be repaid.

“It will either be reimbursed by taxes or reimbursed by the Reserve Bank.”

That’s not to say that QE wasn’t worth it, it most certainly averted economic disaster.

It’s just that it doesn’t happen in a vacuum.

The debt has been created and it will have to be managed and paid off.

When can all this happen?

We know that bank fixed rates are on the rise, but of course a crucial question is whether the spot rate will increase this year, which would affect the rates on ES deposits of commercial banks.

It depends on the RBA itself.

It is indicated that he will be patient and first wants to see a significant increase in wages.

However, the pandemic and supply chain issues are already pushing inflation up, which could force the Reserve Bank to raise the targeted cash rate sooner than expected.

And in the United States, which is ahead of us to see inflation rise, the Federal Reserve said this week that interest rate hikes could take place there as early as March.

Based on the RBA’s 2021 annual report, she doesn’t think she’ll need to appeal to the government for more funds.

When we asked the Treasury for a response, it indicated that the RBA’s capital can be replenished over time by retaining future profits, rather than through a capital injection (money from government revenue).

The multibillion dollar question is: what if interest rates were to rise significantly this year?

If they do, the taxpayer will have to pay billions.

Free meal? No chance.


Source link

]]>
Oversized Mortgages: Can You Get One & What Are The Dangers? | Mortgages https://bobsbirdhouse.com/oversized-mortgages-can-you-get-one-what-are-the-dangers-mortgages/ Sat, 08 Jan 2022 07:00:00 +0000 https://bobsbirdhouse.com/oversized-mortgages-can-you-get-one-what-are-the-dangers-mortgages/ This could be the year of the giant mortgage – for some UK buyers at least – as lenders loosen their purse strings and increase the maximum amounts they are willing to offer. Mortgage lender Habito recently announced that it will let some buyers borrow up to seven times their salary – well above the […]]]>

This could be the year of the giant mortgage – for some UK buyers at least – as lenders loosen their purse strings and increase the maximum amounts they are willing to offer.

Mortgage lender Habito recently announced that it will let some buyers borrow up to seven times their salary – well above the traditional maximum – to help them “secure their dream home sooner.”

In the coming months, a new lender called Perenna plans to launch mortgages of up to six times the salary, and some experts believe more similar deals will emerge this year.

Those who qualify for these mortgages could buy a property they thought was well outside their price bracket – perhaps a house costing £ 200,000 more than they thought they could afford.

Some might argue that letting people borrow more is the only realistic answer to the fact that years of soaring property values ​​have left many prices off the market. The average price of a house is now 8.6 times the average income, according to official data.

However, these new offers are only open to certain borrowers and have a number of drawbacks, probably the most important of which is that you may be able to get a much cheaper interest rate if you go for a standard offer. Just because a bank is prepared to invest heavily in its loans doesn’t mean it’s necessarily a good idea to take out an oversized mortgage.

The basics

Banks and mortgage lenders look at various aspects of people’s finances when deciding how much mortgage they think a person can afford. Traditionally, the maximum amount a person can borrow is between four and five times their salary. This is called the income multiple.

The average price of a house is now 8.6 times the average income. Photograph: incamerastock / Alamy

In the years following the 2007-08 financial crisis, the rules were tightened to prevent a repeat of reckless lending that some argued were commonplace before the crash. The Bank of England has placed limits on mortgages over 4.5 times earnings: banks can offer higher income multiples, but only on a set proportion of their loans.

Last year, a number of major lenders raised their caps to 5.5 times the salary for some borrowers.

New offers

Habito, who started as a mortgage broker in 2016 before moving into lending in 2019, offers borrowing up to an income multiple of seven times base salary, but not to everyone.

The offers are only available to people who take out one of the company’s fixed life mortgages. Launched last year under the Habito One brand, they allow borrowers to lock in their monthly payments at the same level for up to 40 years.

Habito One is open to first-time buyers, movers and remortgagers in England and Wales. You’ll need a 10% down payment (he says he hopes to kick off a deal for those who can only manage 5% soon) and there is a hefty product fee of £ 1,995 to pay.

To qualify for the largest loans available, applicants must have one of the following jobs: teacher, firefighter, nurse, paramedic, doctor, police officer, accountant, lawyer, engineer, lawyer, dentist, architect, surveyor or veterinarian. They must also earn a minimum base salary of £ 25,000 per year.

High income earners – those with a minimum base salary of £ 75,000 – who do not have one of these jobs are also eligible.

Both individual and joint applications will be considered, although if it is a couple, only one will be accepted up to seven times the salary, the other up to five times.

At the time of writing this report, Habito One no prepayment charge rates start at 2.99% (for a 15-year term where someone borrows 60% of the property’s value), rising to 5. 6% (for a period of 40 years where the applicant borrows at 90%). The rates with prepayment charges – the peg period is 10 years – are slightly lower: from 2.79% to 5.4%.

Apartments in Reading, Berkshire
Habito One is open to first-time buyers, movers and remortgagers in England and Wales. Photograph: Geoffrey Swaine / Rex / Shutterstock

Perenna, meanwhile, plans to launch her lifetime mortgages in the second half of this year and says she will allow homebuyers to borrow up to six times their income. He intends to start with a 30-year fixed rate and then roll out 40 and 50-year fixes later.

One of the big drawbacks of this new generation of mortgages offering fixed monthly payments for decades is that most people will be able to get a much lower interest rate if they go for a shorter term standard deal. like a two or five year contract. to fix. With these, at the end of the offer period, you simply switch to another competitive offer.

Elsewhere, rates for first-time buyers looking for a standard two-year solution up to 90% of the loan-to-value ratio currently start at just 1.23%, according to data provider Moneyfacts.

But the lenders behind these fixed life agreements claim that because your interest rate is guaranteed for the life of your loan, you are protected against any threat of interest rate fluctuations and you will not have keep paying expensive product fees, maybe every two or three years.

Math

Take a couple where both earn £ 25,000: If they went for a deal where the loan was capped at 4.5 times their combined salary, they might be able to buy a house worth £ 250,000. If they accepted and qualified for the Habito One deal, they could borrow seven times one paycheck and five times the other, which would allow them to buy a home for £ 333,000.

For a solo seeker earning £ 75,000 whose loan was capped at 4.5 times income, he might be able to buy a house for £ 375,000. With this new deal, they could potentially buy a property worth £ 560,000 (in this latest example, it’s not quite seven times the total salary due to Habito’s rule that clients must have at least 10% cash in their accounts after all expenses). (All examples assume a 10% deposit).

Banks in London
Barclays and HSBC are among the big names that will increase the incomes of high-income borrowers looking for a mortgage up to 5.5 times. Photograph: Chris Ratcliffe / Rex Shutterstock

What about other lenders?

Several big names – including Halifax, HSBC, Santander and Barclays – will now reach up to 5.5 times the incomes of high-income borrowers, and generally allow those who are accepted to access their full range of standard mortgage deals. .

In Halifax, a maximum of 5.5 times the salary will apply to those earning over £ 75,000 who borrow up to £ 1million at less than 75% LTV.

HSBC requires a salary of £ 100,000 or more, and the maximum loan is 90%.

At Santander, this is a combined income for all applicants of £ 100,000 or more, with a maximum loan of 75%.

With Barclays, at least one borrower must have £ 75,000 and over, or the top two earning applicants must have a combined income of £ 100,000 or more, and the maximum loan is 85%.

The return of big credits

After the 2007-08 financial crisis, first-time home mortgage loans in particular were immediately reduced, but in recent years, many lenders have eased credit restrictions.

Further easing is on the cards: The Bank of England has announced it will consult on removing a rule that requires many borrowers to prove they can afford a steep rise in interest rates before they can get a mortgage loan. Currently, with a typical two or five year agreement, lenders must stress test an applicant’s ability to repay their home loan at 3% above the standard variable rate at which the borrower. could access the end of the initial period. . This limits the amounts that many people can borrow.

The new generation of long term fixed rate mortgages avoid these restrictions because their interest rates are guaranteed for the life of the loan. Perenna says, “There are no interest rate stress tests with long-term fixed-rate products because borrowers are protected against any rise in long-term interest rates and will not return to the market. Higher SVR of a lender.


Source link

]]>
Rising US Yields Support Japanese Rates and Test BOJ Policy https://bobsbirdhouse.com/rising-us-yields-support-japanese-rates-and-test-boj-policy/ Thu, 06 Jan 2022 04:35:00 +0000 https://bobsbirdhouse.com/rising-us-yields-support-japanese-rates-and-test-boj-policy/ BOJ proposes to pump 2,000 billion yen through temporary bond purchase The 10-year benchmark JGB hits 0.110%, its highest since April 2021 Key return still in a loose range BOJ hangs around target TOKYO, Jan.6 (Reuters) – A surge in U.S. Treasury yields pushed Japanese long-term interest rates up to their nine-month high on Thursday, […]]]>
  • BOJ proposes to pump 2,000 billion yen through temporary bond purchase
  • The 10-year benchmark JGB hits 0.110%, its highest since April 2021
  • Key return still in a loose range BOJ hangs around target

TOKYO, Jan.6 (Reuters) – A surge in U.S. Treasury yields pushed Japanese long-term interest rates up to their nine-month high on Thursday, testing the central bank’s resolve to cap borrowing costs around zero.

The Bank of Japan on Thursday offered to buy medium- and very long-term government bonds, along with a separate offer to inject 2,000 billion yen ($ 17.22 billion) into the markets between the January 7 and 14.

The announcement came as the benchmark 10-year Japanese Government Bond (JGB) yield hit 0.110% on Thursday, the highest since April 6 of last year, following a steady rise in Treasury yields. American.

Register now for FREE and unlimited access to Reuters.com

While the BOJ has tools to fight against unwanted yield gains, a sustained rise in US interest rates could call into question the central bank’s commitment as part of its yield curve control policy. (YCC) to cap 10-year returns around zero.

“It feels like Japanese and EU rates are just following movements in US rates. As for Japan, I think discussions of a BOJ policy change could arise towards the end of the year. year, “said Takafumi Yamawaki, head of fixed income research in Japan at JPMorgan. Securities.

“Some hedge funds may seek to test YCC” before Governor Haruhiko Kuroda’s term expires next April, he said. “But not many people think about it at this point.”

As part of efforts to keep inflation up to its 2% target, the BOJ guides short-term interest rates to -0.1% and 10-year JGB yields around 0% via an aggressive silver print.

In response to concerns that its massive bond purchase program is draining market liquidity, the BOJ decided in March to allow the 10-year rate to fluctuate 0.25% around its target of 0%. Read more

Few analysts expect the 10-year yield to cross the 0.25% cap anytime soon, due to continued investor appetite for bonds and the BOJ’s huge presence in the JGB market .

With inflation well below the central bank’s 2% target, Governor Kuroda has repeatedly stressed that the BOJ is ready to keep rates ultra-low even as the US Federal Reserve contemplates rate hikes.

Recent volatility will test the BOJ’s efforts to allow market forces to boost returns – but not too much to threaten YCC, analysts say. It also highlights how BOJ policy will continue to be influenced by Fed moves.

“It will all depend on the Fed’s actions on whether Japanese bond yields continue to rise,” said Noriatsu Tanji, chief bond strategist at Mizuho Securities.

($ 1 = 116.1700 yen)

Register now for FREE and unlimited access to Reuters.com

Additional reporting by Tetsushi Kajimoto, Daniel Leussink and Kantaro Komiya Editing by Sam Holmes and Jacqueline Wong

Our standards: Thomson Reuters Trust Principles.


Source link

]]>
Mortgage Rates Today | January 4, 2022 https://bobsbirdhouse.com/mortgage-rates-today-january-4-2022/ Tue, 04 Jan 2022 15:46:38 +0000 https://bobsbirdhouse.com/mortgage-rates-today-january-4-2022/ January 4, 2022 6:34 AM Leslie Cook Posted: January 4, 2022 6:34 AM Update: January 4, 2022 8:08 AM The interest rate on a 30-year fixed rate mortgage is 3.713%, according to the most recent data available. Thirty-year refinance loans are also experiencing higher rates, starting the week at 2.613%. Mortgage rates are still historically […]]]>

The interest rate on a 30-year fixed rate mortgage is 3.713%, according to the most recent data available. Thirty-year refinance loans are also experiencing higher rates, starting the week at 2.613%.

Mortgage rates are still historically low, despite recent increases. For borrowers with good to excellent credit planning on to buy a house Where refinancing their home loan, low rates and affordable monthly payments are available.

  • The last rate on a 30 year fixed rate mortgage is 3.713%.⇑
  • The last rate on a 15 year fixed rate mortgage is 2.613%. ??
  • The latest rate on a 5/1 ARM is 2.269%. ??
  • The latest rate on a 7/1 ARM is 2.51%. ??
  • The latest rate on a 10/1 ARM is 2.583%. ??

Money is everyday mortgage the rates reflect what a borrower with a 20% down payment and a credit score of 700 – roughly the national average – could pay if they applied for a home loan now. Daily rates are based on the average rate of 8,000 lenders offered to applicants on the previous business day. Freddie Mac Weekly Rates will generally be lower, since they measure the rates offered to borrowers with higher credit scores.

Today’s 30-year fixed rate mortgage rates

  • The 30-year rate is 3.713%.
  • It’s a day to augment by 0.067 percentage point.

The 30-year fixed rate home loan is the most popular type of mortgage loan due to its long repayment term, which results in lower monthly payments. Another interesting feature of this loan is the fact that the interest rate and monthly payments will not change. However, the interest rate will be higher than with a shorter term loan, so you will pay more long term interest.


Average mortgage rates

Data based on U.S. mortgages closed on January 3, 2022

15-YEAR FIXED AGREEMENT

  • January 3: 2.56%
  • Last week: 2.58%
  • Change: -0.02%

CONVENTIONAL FIXED 30 YEARS

  • January 3: 3.63%
  • Last week: 3.67%
  • Change: -0.04%

7/1 RATE OF ARMS

  • January 3: 3.65%
  • Last week: 3.1%
  • Change: 0.55%

ARM RATE 10/1

  • January 3: 3.62%
  • Last week: 3.15%
  • Change: 0.47%

Find your real rate at Quicken Loans.

Click below to get started and view your rate today.

See the prices of January 04, 2022


15 years today fixed rate mortgage rates

  • The 15-year rate is 2.613%.
  • It’s a day to augment by 0.033 percentage point.
  • It’s a month to augment by 0.005 percentage point.

The shorter term of a 15-year fixed rate mortgage means you’ll pay off the loan in half the time than a 30-year mortgage. It also means that the monthly payments will be higher. On the plus side, the interest rate will be lower than on a longer term loan, so you will pay less over time despite the higher payments.

The latest adjustable rate mortgage rates

  • The latest rate on a 5/1 ARM is 2.269%. ??
  • The latest rate on a 7/1 ARM is 2.51%.??
  • The latest rate on a 10/1 ARM is 2.583%. ??

The interest rate on adjustable rate mortgages will be fixed for a number of years before it becomes variable and begins to adjust regularly. A 5/1 ARM, for example, will have a fixed rate for five years before starting to change each year. An ARM might be a good option if you don’t plan on staying in the home for the long term, or if you plan to refinance, as the initial interest rate tends to be very low. However, once the rate becomes adjustable, the rate could increase significantly.

The latest VA, FHA and jumbo loan rates

The average rates for FHA, VA and jumbo loans are:

  • The rate for a 30-year FHA mortgage is 3.413%.??
  • The rate for a 30-year VA mortgage is 3.536%. ??
  • The rate for a 30-year jumbo mortgage is 3.853%. ??

The latest mortgage refinancing rates

The average refinancing rates for 30-year loans, 15-year loans and ARMs are:

  • The refinancing rate on a 30 year fixed rate refinance is 3.86%. ??
  • The refinance rate on a 15 year fixed rate refinance is 2.719%. ??
  • The refinancing rate on an ARM 5/1 is 2.565%. ??
  • The refinancing rate on an ARM 7/1 is 2.812%. ??
  • The refinancing rate on an ARM 10/1 is 2.886%. ??

Average mortgage refinancing rates

Data based on U.S. mortgages closed on January 3, 2022

15-YEAR FIXED AGREEMENT

  • January 3: 2.66%
  • Last week: 2.69%
  • Change: -0.03%

CONVENTIONAL FIXED 30 YEARS

  • January 3: 3.76%
  • Last week: 3.84%
  • Change: -0.08%

7/1 RATE OF ARMS

  • January 3: 3.88%
  • Last week: 3.23%
  • Change: 0.65%

ARM RATE 10/1

  • January 3: 4.04%
  • Last week: 3.73%
  • Change: 0.31%

Find your real rate at Quicken Loans.

Click below to get started and view your rate today.

See the prices of January 04, 2022


Where Are Mortgage Rates Going This Year?

Mortgage rates fell through 2020. Millions of homeowners responded to low mortgage rates by refinancing existing loans and taking out new ones. Many people have bought homes that they might not have been able to afford if the rates were higher. In January 2021, rates briefly fell to all-time low levels, but edged up slightly for the rest of the year.

Look ahead, experts believe that interest rates will rise further in 2022, but also modestly. Factors that could affect rates include continued economic improvement and more labor market gains. The Federal Reserve has also started cutting back on mortgage-backed securities purchases and announced that it plans to hike the federal funds rate three times in 2022 to fight rising inflation.

While mortgage rates are likely to rise, experts say the increase won’t happen overnight, and it won’t be a dramatic jump. Rates are expected to stay near their historically low levels throughout the first half of the year, rising slightly later in the year. Even with rates rising, this will still be a good time to finance a new home or refinance a mortgage.

Factors that influence mortgage rates include:

  • The Federal Reserve. The Fed took swift action when the pandemic hit the United States in March 2020. The Fed announced plans to move money through the economy by lowering the Federal Fund’s short-term interest rate between 0% and 0.25%, which is as low as they go. The central bank has also pledged to buy mortgage-backed securities and treasury bills, supporting the housing finance market, but started curtailing those purchases in November.
  • The 10-year Treasury note. Mortgage rates move at the same pace as the yields on 10-year government treasury bills. Yields fell below 1% for the first time in March 2020 and have risen since then. On average, there is typically a 1.8 point “spread” between Treasury yields and benchmark mortgage rates.
  • The economy in the broad sense. Unemployment rates and changes in gross domestic product are important indicators of the overall health of the economy. When employment and GDP growth are low, it means the economy is weak, which can lower interest rates. Thanks to the pandemic, unemployment levels reached record levels early last year and have yet to recover. GDP has also been affected, and although it has rebounded somewhat, there is still a lot of room for improvement.

Tips for getting the lowest mortgage rate possible

There is no universal mortgage rate that all borrowers receive. Qualifying for the lowest mortgage rates takes a bit of work and will depend on both personal financial factors and market conditions.

Check your credit score and your credit report. Mistakes or other red flags can lower your credit score. The borrowers with the highest credit scores will get the best rates, so it’s essential to check your credit report before you begin the home search process. Taking action to correct mistakes will help increase your score. If you have high credit card balances, paying them off can also give you a quick boost.

Save money for a large down payment. This will lower your loan-to-value ratio, which means how much of the home’s price the lender has to finance. A lower LTV usually results in a lower mortgage rate. Lenders also like to see money that has been saved in an account for at least 60 days. It tells the lender that you have the money to finance the purchase of the house.

Shop around for the best rate. Don’t settle for the first interest rate a lender offers you. Check with at least three different lenders to see who is offering the lowest interest rate. Also consider the different types of lenders, such as credit unions and online lenders, in addition to traditional banks.

As well. take the time to learn about the different types of loans. While the 30-year fixed-rate mortgage is the most common type of mortgage, consider a shorter-term loan such as a 15-year loan or an adjustable rate mortgage. These types of loans often have a lower rate than a conventional 30-year mortgage. Compare the costs of everyone to see which one best suits your needs and your financial situation. Government loans – such as those backed by the Federal Housing Authority, the Department of Veterans Affairs, and the Department of Agriculture – may be more affordable options for those who qualify.

Finally, lock in your rate. Locking in your rate once you find the right rate, the right loan product, and the lender will help ensure that your mortgage rate does not increase until the loan closes.

Our mortgage rate methodology

Money’s Daily Mortgage Rates show the average rate offered by over 8,000 lenders in the United States for which the most recent rates are available. Today we’re posting the rates for Thursday, December 30, 2021. Our rates reflect what a typical borrower with a credit score of 700 can expect to pay on a home loan right now. These rates were offered to people with a 20% deposit and include discount points.

More money :

© Copyright 2021 Advertising Practitioners, LLC. All rights reserved.

This article originally appeared on Money.com and may contain affiliate links for which Money receives compensation. The views expressed in this article are those of the author alone, not those of any third party, and have not been reviewed, endorsed or endorsed in any way. Offers are subject to change without notice. For more information read Money disclaimer.


Source link

]]>
Wall Street is bearish on Treasuries in 2022 https://bobsbirdhouse.com/wall-street-is-bearish-on-treasuries-in-2022/ Sun, 02 Jan 2022 12:30:00 +0000 https://bobsbirdhouse.com/wall-street-is-bearish-on-treasuries-in-2022/ Text size The time of dreams Wall Street is bearish on Treasuries in 2022. The Federal Reserve recently adopted a more hawkish policy, and analysts predict the central bank could raise rates as early as March. This does not bode well for prices, which move inversely to yields, but global demand for higher yielding Treasuries […]]]>

Text size


Source link

]]>
Ridgewood Canadian Investment Grade Bond Fund Announces Estimated First Quarter Payout Rate https://bobsbirdhouse.com/ridgewood-canadian-investment-grade-bond-fund-announces-estimated-first-quarter-payout-rate/ Fri, 31 Dec 2021 14:30:00 +0000 https://bobsbirdhouse.com/ridgewood-canadian-investment-grade-bond-fund-announces-estimated-first-quarter-payout-rate/ TSX symbol: RIB.UN TORONTO, December 31, 2021 / CNW / – Ridgewood Canadian Investment Grade Bond Fund (the “Funds“) is pleased to announce the Fund’s estimated distributions for the first quarter of 2022 as follows: Estimated payment date Estimated distribution amount per unit February 15, 2022 $ 0.0530 March 15, 2022 $ 0.0530 April 14, […]]]>

TSX symbol: RIB.UN

TORONTO, December 31, 2021 / CNW / – Ridgewood Canadian Investment Grade Bond Fund (the “Funds“) is pleased to announce the Fund’s estimated distributions for the first quarter of 2022 as follows:

Estimated payment date

Estimated distribution amount per unit

February 15, 2022

$ 0.0530

March 15, 2022

$ 0.0530

April 14, 2022

$ 0.0530

This distribution rate is equivalent to an annualized distribution rate of 5.30% on an initial subscription price of $ 12.00 per unit. The details of each distribution, including the date of registration and payment, will be confirmed at the time of declaration of the distribution.

About Ridgewood Canadian Investment Grade Bond Fund:

The Fund will seek to achieve the following investment objectives: (i) to provide Unitholders with targeted monthly cash distributions at 5.3% per annum of the initial issue price of $ 12.00 per unit; and (ii) maximize total returns to unitholders while preserving capital over the long term.

About Ridgewood Capital Asset Management Inc .:

Ridgewood is an independent investment manager who manages approximately $ 1.6 billion in assets for a diversified clientele of high net worth individuals, foundations / foundations, First Nations mandates and institutional accounts, of which approximately $ 1.25 billion is invested in fixed income assets.

This press release contains forward-looking information. The forward-looking information contained in this press release is based on historical information concerning the income generated by the Fund’s portfolio. Actual future results, including the amount of distributions paid by the Fund, may differ from the amount of estimated monthly distributions. More specifically, the income from which distributions are paid can vary significantly due to: changes in the composition of the portfolio; changes in income received from securities included in the Fund’s portfolio from time to time; general economic and stock market conditions, including changes in interest rates; and the level of borrowing of the Fund. The risks, uncertainties and other factors that may influence actual results are described under the heading “Risk Factors” in the Fund’s prospectus dated December 8, 2011 and other documents filed by the Fund with Canadian securities regulatory authorities. Foresight the information contained in this press release constitutes the Fund’s current estimate, as of the date of this press release, with respect to the matters covered herein. Investors and others should not assume that any forward-looking statements contained in this press release represent the Fund’s estimate as of any date other than the date of this press release.

SOURCE Ridgewood Canadian Investment Grade Bond Fund

Cision

Show original content: http://www.newswire.ca/en/releases/archive/December2021/31/c1005.html


Source link

]]>
Axis Bank Revised interest rate on fixed deposit Plus for domestic and NRE customers https://bobsbirdhouse.com/axis-bank-revised-interest-rate-on-fixed-deposit-plus-for-domestic-and-nre-customers/ Thu, 30 Dec 2021 06:42:45 +0000 https://bobsbirdhouse.com/axis-bank-revised-interest-rate-on-fixed-deposit-plus-for-domestic-and-nre-customers/ Fixed deposit Plus The Axis Bank Fixed Deposit Plus plan has been designed to offer higher rates and more flexibility. Axis Bank Fixed Deposit Plus is a good choice for lump sum investments. Potential consumers will be able to select the type of interest calculation technique and the type of deposit, among other options. The […]]]>

Fixed deposit Plus

The Axis Bank Fixed Deposit Plus plan has been designed to offer higher rates and more flexibility. Axis Bank Fixed Deposit Plus is a good choice for lump sum investments. Potential consumers will be able to select the type of interest calculation technique and the type of deposit, among other options. The fixed deposit Plus does not allow premature withdrawal.

Bank interest rate of the axis on fixed deposits more than Rs 5 Cr and more

Bank interest rate of the axis on fixed deposits more than Rs 5 Cr and more

As of 12/30/2021, the bank grants the Interest on Fixed Deposits Plus plan to national deposits on deposits of Rs 5 Cr and more.

Period Deposit Rs 5 Cr Deposit Rs 10 Cr Deposit Rs 25 Cr Deposit Rs 50 Cr Deposit Rs 100 Cr and more
7 days to 14 days 2.50% 2.50% 2.50% 3.05% 3.05%
15 days to 29 days 2.50% 2.50% 2.50% 3.05% 3.05%
30 days to 45 days 3.00% 3.00% 3.00% 3.10% 3.10%
46 days to 60 days 3.00% 3.00% 3.00% 3.10% 3.10%
61 days 3.25% 3.25% 3.25% 3.25% 3.25%
3 months 3.65% 3.65% 3.65% 3.65% 3.65%
4 months 3.75% 3.75% 3.75% 3.85% 3.85%
5 months 3.75% 3.75% 3.75% 4.20% 4.20%
6 months 4.10% 4.10% 4.10% 4.25% 4.25%
7 months 4.10% 4.10% 4.10% 4.25% 4.25%
8 months 4.10% 4.10% 4.10% 4.25% 4.25%
9 months 4.25% 4.25% 4.25% 4.30% 4.30%
10 months 4.25% 4.25% 4.25% 4.30% 4.30%
11 months 4.25% 4.25% 4.25% 4.30% 4.30%
11 months 25 days 4.25% 4.25% 4.25% 4.30% 4.30%
1 year 4.50% 4.50% 4.50% 4.60% 4.70%
1 year 5 days 4.50% 4.50% 4.50% 4.60% 4.70%
1 year 11 days 4.50% 4.50% 4.50% 4.60% 4.70%
1 year 25 days 4.50% 4.50% 4.50% 4.60% 4.70%
13 months 4.50% 4.50% 4.50% 4.60% 4.70%
14 months 4.50% 4.50% 4.50% 4.60% 4.70%
15 months 4.50% 4.50% 4.50% 4.60% 4.70%
16 months 4.50% 4.50% 4.50% 4.60% 4.70%
17 months 4.50% 4.50% 4.50% 4.60% 4.70%
18 months 4.50% 4.50% 4.50% 4.60% 4.70%
2 years 4.70% 4.70% 4.70% 4.80% 4.80%
30 months 4.70% 4.70% 4.70% 4.80% 4.80%
3 years 4.70% 4.70% 4.70% 4.90% 4.90%
5 years to 10 years 4.70% 4.70% 4.70% 4.90% 4.90%

Source – Axis Bank official website

Axis bank interest rate on fixed deposit Plus on Rs 5 Cr and above for NRE client

Axis bank interest rate on fixed deposit Plus on Rs 5 Cr and above for NRE client

As of 12/30/2021, the bank offers the Fixed Deposit Interest Plus plan for external non-residents on the deposit of Rs 5 Cr and more.

Period Deposit Rs 5 Cr Deposit Rs 10 Cr Deposit Rs 25 Cr Deposit Rs 50 Cr Deposit Rs 100 Cr and more
1 year 4.50% 4.50% 4.50% 4.60% 4.70%
1 year 5 days 4.50% 4.50% 4.50% 4.60% 4.70%
1 year 11 days 4.50% 4.50% 4.50% 4.60% 4.70%
1 year 25 days 4.50% 4.50% 4.50% 4.60% 4.70%
13 months 4.50% 4.50% 4.50% 4.60% 4.70%
14 months 4.50% 4.50% 4.50% 4.60% 4.70%
15 months 4.50% 4.50% 4.50% 4.60% 4.70%
16 months 4.50% 4.50% 4.50% 4.60% 4.70%
17 months 4.50% 4.50% 4.50% 4.60% 4.70%
18 months 4.50% 4.50% 4.50% 4.60% 4.70%
2 years 4.70% 4.70% 4.70% 4.80% 4.80%
30 months 4.70% 4.70% 4.70% 4.80% 4.80%
3 years 4.70% 4.70% 4.70% 4.90% 4.90%
5 years to 10 years 4.70% 4.70% 4.70% 4.90% 4.90%

Source – Axis Bank official website


Source link

]]>
Are the prices going to go down? – Councilor Forbes https://bobsbirdhouse.com/are-the-prices-going-to-go-down-councilor-forbes/ Tue, 28 Dec 2021 10:00:55 +0000 https://bobsbirdhouse.com/are-the-prices-going-to-go-down-councilor-forbes/ Editorial Note: We earn a commission on partner links on Forbes Advisor. Commissions do not affect the opinions or ratings of our editors. The housing market broke new records on several fronts throughout 2021, leaving homebuyers to question whether they should buy now or wait in the hopes that more homes become available and at […]]]>

Editorial Note: We earn a commission on partner links on Forbes Advisor. Commissions do not affect the opinions or ratings of our editors.

The housing market broke new records on several fronts throughout 2021, leaving homebuyers to question whether they should buy now or wait in the hopes that more homes become available and at more affordable prices in the future. 2022.

So far, house price appreciation rose 18.5% year-on-year (YOY) in the third quarter, the highest level in the history of the agency’s house price index Federal Housing Finance (FHFA). Inflation has been increasing at the fastest rate since 1982. At the same time, the number of homes for sale has declined, creating increased pressure on home prices.

The supply of homes plunged to an all-time low, with just 1.38 million homes on the market in June, down 23% annually. Homebuyers have taken in homes faster than ever, reducing the number of days on the market to an all-time high of just 15 days.

And mortgage rates are hovering around the 3.1% mark for a 30-year fixed-rate mortgage – while not the lowest on the books, it’s very close.

Here’s what that means for 2022, according to housing experts.

Will house prices increase in 2022?

Depending on whether you are the buyer or the seller, you might be very happy or very disappointed to hear that house prices are set to increase in 2022, according to most experts. While headwinds like rising mortgage rates and a significant increase in Covid-19 cases may hamper price growth, they will not stop home price appreciation from rising.

“Much of what drove strong price growth this year will follow us next year,” says Nicole Bachaud, economist at Zillow. “We expect to see prices rise to extremely high levels in the first few months of 2022 before starting to decline to more normal levels.”

Most experts say housing demand will remain strong in 2022 unless inflation continues to exceed wages at the current feverish pace, which could dampen buyers’ appetites. Rising inflation is also putting tenants in a difficult position who can no longer afford to save so much for a down payment as rental rates skyrocket.

The national average rental price for a one-bedroom jumped 21.3% and more than 16.7% for a two-bedroom in October on an annual basis, according to the latest apartment guide and Rent.com report.

“What can affect demand is the affordability challenge,” says Danielle Hale, chief economist at Realtor.com. “One thing that can compensate for this is a more competitive job market. “

A recent survey of the Conference board suggests a 3.9% wage cost for businesses in 2022, which would be the biggest wage increase since 2008. But even that increase would not make homeownership easier for most first-time buyers.

The wild card that could chill house prices controls Covid enough to convince people to return to big cities, says Todd Teta, head of products and technology at Attom, a real estate data company. He also says the reverse could be happening – a spike in Covid cases, for example – sparking more interest in suburban real estate.

“If the pandemic wears off, interest in rental housing in congested urban areas could reignite, especially if employers start demanding more workers return to their offices. This could drastically reduce buyer demand and ease the pressure on prices, ”says Teta. But “it will all depend on how many more people with the means to buy are worried about where they live now and how the pandemic is unfolding.”

It’s important to note that while these are national trends, real estate is local. So while places like Boise, Idaho saw a 37.3% year-over-year price increase, Philadelphia saw more modest price growth of 9.9% over the same period.

Home inventory predictions for 2022

One of the main determinants of the evolution of house prices is the quantity of available supply relative to demand. One way to gauge this is to look at the supply of homes for sale in months, which estimates how long the existing inventory for sale would last based on the current sale rate if no new homes were built.

The lowest monthly supply for 2021 was in January, with just 3.6 months of supply and the highest was in August at 6.6 months, a significant jump, according to the Federal Reserve Bank of St. Louis. Although supply has gradually picked up from the spring to the end of 2021, some forecasters expect supply to ease.

On the one hand, the construction of new homes is hampered by the rising cost of building materials and a severe labor shortage. All building materials, from copper to steel, have jumped in costs, but lumber prices, in particular, have seen astronomical price increases. Lumber futures jumped to an all-time high of $ 1,670 per thousand board feet in May. It started to cool down in the summer, dropping to $ 454 per thousand board feet in August. However, it climbed back to over $ 1,044 as of December 20.

Amid the housing affordability crisis, the Biden administration is poised to make lumber costs even higher. The Commerce Department said on Nov. 24 it would almost double tariffs on softwood lumber imported from Canada, from an average of 8.99% to 17.99% on their imports.

Several lawmakers and major trade groups like the National Association of Homebuilders are calling for Canadian tariffs to be reduced, as rising lumber costs may reverse gains made in new home construction over the past six months.

“With Biden doubling tariffs on Canadian lumber, this will add a lot of pressure on house costs and on the time it takes to build a house,” said Robert Dietz, chief economist and vice president Principal of Housing Economics and Policy for the National Association of Home Builders. “That’s why you see the median price of a new home above $ 400,000. “

The median price of a new home was $ 407,700 in October, up 17.5% from a year ago, according to the Federal Reserve in St. Louis. New housing prices have been climbing at an accelerated rate since the start of the Covid-19 pandemic. In April 2020, the median new home price was $ 310,100, the lowest point before jumping almost $ 100,000 more over an 18-month period.

As for existing homes entering the market, that will largely depend on the pandemic, says Selma Hepp, deputy chief economist at CoreLogic, a real estate data analysis company.

“While the baby boomers preferred to downsize before the pandemic, it looks like they’re sticking around for now,” Hepp said. “So far, there has not been a noticeable increase in inventory for sale as the baby boomers have stayed put and have potentially provided shelter for their children and families.”

Should you buy a house now or wait?

Buyers who can afford to buy a home now can consider price factors such as interest rates when deciding to take the plunge. However, first-time buyers face much greater challenges, such as increased down payment requirements.

As home prices rise, so do the monthly down payment and mortgage costs. This means that some buyers might have to save more money or seek cheaper accommodation. As more companies have allowed their employees to work remotely, some buyers have moved to more affordable areas, but not everyone.

James McGrath, a licensed New York real estate broker and co-founder of Yoreevo, a residential brokerage firm, said demand will start to cool in 2022, so there may be more availability for those waiting.

“It’s very difficult for the amount of sales to stay at all-time highs when there isn’t much to sell,” McGrath says. “It seems almost certain that the number of transactions will decrease. With this, buyers can be more patient. There should be less competition from buyers and more homes to choose from as we standardize on the two. “

There are unforeseen variables that can change the price of real estate at any time, so the best strategy is to make sure that you can afford the house you are buying and that you still have room to save for the days of it. rain. For example, if you buy with a partner or co-signer and they lose their job, make sure you can pay off the mortgage with just one income.

You should also plan to live there for at least five years or enough time to cover your closing costs, so that you don’t lose money when you sell. A mortgage affordability calculator is a great tool for determining your budget.


Source link

]]>
Homebuyers can now borrow 7 times their salary with Habito https://bobsbirdhouse.com/homebuyers-can-now-borrow-7-times-their-salary-with-habito/ Sun, 26 Dec 2021 11:44:44 +0000 https://bobsbirdhouse.com/homebuyers-can-now-borrow-7-times-their-salary-with-habito/ A mortgage lender now allows homebuyers to borrow seven times their salary in order to “secure their dream home sooner” – but there are several pitfalls. Mortgage market disruptor Habito has changed the terms of its Habito One product to allow certain types of borrowers a much higher loan-to-income ratio. Typically, banks allow loans of […]]]>

A mortgage lender now allows homebuyers to borrow seven times their salary in order to “secure their dream home sooner” – but there are several pitfalls.

Mortgage market disruptor Habito has changed the terms of its Habito One product to allow certain types of borrowers a much higher loan-to-income ratio.

Typically, banks allow loans of up to 4.5 times the combined salary of applicants.

There is another problem with Habito’s mortgage: borrowers must agree to set their interest rate for the life of the mortgage; between 15 and 40 years old.

Habito says being able to borrow 7 times their income could allow homebuyers to buy a larger home sooner than they might otherwise – but there are pitfalls

Habito’s seven times income offer is only available to applicants in the following professions: firefighters; police officers; NHS doctors, nurses and paramedics; teachers in the public sector; accountants; lawyers; lawyers; civil engineers; dentists; architects; surveyors and veterinarians.

They must be qualified, practicing and registered with the appropriate industry body.

It will also accept applications where at least one borrower earns a salary of £ 75,000 or more in any profession.

In joint applications, a single borrower will be able to borrow 7 times their salary, even if both are in a qualifying profession or earn more than £ 75,000. The other can borrow up to 5 times his salary.

Unlike Habito’s long-term fixed rates, borrowers typically only fix their rate for two or five years, after which they can remortgage on another product.

Applicants who do not meet the criteria can still get a Habito One mortgage with a fixed rate for the entire term, but will only be able to borrow up to 5 times their salary.

All Habito One products come with a hefty product fee of £ 1,995, although this can be added to the loan.

What are the rates, and is a long-term fixed rate a good idea?

Rates on Habito One products start at 2.79 percent, if the buyer has a 40 percent deposit, takes out the 15-year mortgage, and agrees to pay a prepayment charge (ERC ) if he later decides to remortgage or prepay the loan.

Without ERC, the cheapest rate is 2.99 percent.

For those with lower deposits, the rates are much higher. A borrower with a 10 percent deposit and a maximum term of 40 years, with no prepayment charge, would pay 5.60 percent.

The cheapest rate available elsewhere on a standard two-year fixed mortgage with borrowing up to 4.5 income is much lower.

The rates available on Habito One mortgages are above the market average

The rates available on Habito One mortgages are above the market average

Right now, a borrower with a 40% deposit could get a rate of just 1.11% with Barclays, with a fee of £ 999.

Even if they only had a 10% deposit, they could get a rate of 1.61% with a fee of £ 1,249 with Platform.

According to the latest data from Moneyfacts, the typical rate of a two-year fix for someone with a 10% deposit is now 2.51%, well below the 3.79% of December 2020, and even lower than that of December 2020. before the pandemic.

> Find the best mortgage deal for you using the This is Money mortgage service

Whether setting a long term mortgage rate is a good idea depends on the rate offered and where the borrower thinks the rates will go in the long term.

Although still very low in historical terms, interest rates are rising slightly after months of sustained decline.

Indeed, the Bank of England raised its base rate from 0.1% to 0.25% this month.

It is expected to rise further in 2022, with some estimates suggesting it could reach 0.50% during the year.

If the base rate, and therefore mortgage rates, were to rise much more substantially than this over time, then setting Habito rates for life might start to make sense.

In October, the OBR warned of a worst-case scenario in which a “wage spiral” or energy price shock would cause the base rate to rise to 3.5% in 2023.

If this extreme scenario were to come true, a lifetime mortgage on one of the Habito One rates would start to look like a better deal.

Habito One customers could get out of the mortgage at any time if they saw a better deal elsewhere, but only if they had chosen the option without ERC.

Is borrowing 7 times your income reasonable?

Providing a higher loan-to-income ratio means that people with lower wages have an easier time qualifying for a mortgage and allows borrowers to afford a larger or more expensive property than is otherwise possible.

This could potentially mean that they could avoid buying a smaller “starter house” and move directly to owning a larger family home to stay there for the long term, Habito said.

However, borrowers should carefully consider the idea of ​​borrowing more than the average amount, as their monthly mortgage payments will be higher and could be more difficult to cover if their financial situation changes.

Critical workers to whom Habito offers additional loans may be less likely to lose their jobs, but they still need to make sure they can comfortably pay their monthly payments.

NHS workers are one of the groups that will be eligible for Habito's new mortgage offer

NHS workers are one of the groups that will be eligible for Habito’s new mortgage offer

Typically, lenders advance borrowers a maximum of 4.5 times their salary. They may choose to offer some borrowers a little more, often up to 5.5 times, but Bank of England rules strictly limit the number of loans they can make on these terms.

Habito One mortgage applicants borrowing 7 times their income will also need to have the equivalent of 10 percent of the borrowed amount in cash once they have paid their down payment.

They will need to earn at least £ 25,000 per year, have a good credit rating and have been employed full time for at least a year, as opposed to the industry standard of 3 months.

Habito says these additional requirements will ensure that customers borrow “safely”.

Daniel Hegarty, Founder and CEO of Habito, said: “We think this will be particularly attractive to those who want to buy a home with a lot of future potential, or to people who expect salary increases in the near future. their careers, because Habito One allows you to choose to make unlimited overpayments to get out of the mortgage faster. ‘

Being able to borrow only 4.5 times their salary often means that buyers have to save substantial deposits to afford housing, especially in areas with high house prices.

First-time buyers have been forced to find, on average, an additional £ 23,000 to buy a house since the start of the pandemic, according to Aldermore Bank, due to soaring house prices.

Are similar offers available elsewhere?

Banks can offer some mortgages for more than 4.5 times their salary, but the number they can grant is strictly limited due to the risks involved.

The Bank of England had considered increasing the proportion of large mortgages that mortgage lenders can offer to people who need to borrow more than 4.5 times their salary, but recently rejected the idea.

Some banks independently adjust their loan-to-income ratios, but they should only do so within the framework of existing rules.

For example, Nationwide increased its maximum loan-to-income ratio to 5.5 earlier in 2021, although it could only offer the deal to around 5,000 households per year.

The amount Habito can lend on its Habito One mortgages is capped at £ 1 billion.

With a typical mortgage amount of around £ 200,000 this would again mean that around 5,000 households could benefit.

Best Mortgages

Some links in this article may be affiliate links. If you click on it, we may earn a small commission. This helps us fund This Is Money and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.


Source link

]]>
How to get a low cost student loan https://bobsbirdhouse.com/how-to-get-a-low-cost-student-loan/ Fri, 24 Dec 2021 16:20:51 +0000 https://bobsbirdhouse.com/how-to-get-a-low-cost-student-loan/ The most important criterion in choosing a student loan is the cost. Most borrowers prefer a lower cost loan. The main factors that affect the cost of a student loan are the interest rate and the repayment term. Student loan debt is inevitable, as more than two-thirds of students … [+] student loan debt. So […]]]>

The most important criterion in choosing a student loan is the cost. Most borrowers prefer a lower cost loan. The main factors that affect the cost of a student loan are the interest rate and the repayment term.

The cost of a student loan

The cost of a loan depends on the interest rate, loan fees, discounts and rewards, frequency of capitalization of interest, loan cancellation options, and repayment term.

A higher interest rate means a higher cost. A lower interest rate means a lower cost. However, borrowers should prefer fixed rates when interest rates are low, even if fixed rates are higher than variable interest rates, as a variable rate has no choice but to increase. A lower variable rate can save money, but only if you pay off the debt in full before interest rates rise too high.

There is a trade-off between interest rates and loan fees. A 1% increase in the interest rate is equivalent to a 4% increase in loan fees over a 10-year repayment term. Thus, a loan with 4% fees and 9% interest costs more than a loan with 5% fees and 8% interest.

Canceling the loan can lower the cost of a student loan, but most borrowers will not qualify. Even when a borrower is eligible for a loan forgiveness, some loan forgiveness programs require the borrower to repay for 20 or 25 years, which increases the total cost of the loan.

Overall, the frequency of interest capitalization has little impact on the cost of a student loan. If the interest on a 5% loan is capitalized monthly, it increases the effective interest rate for a 12-month tolerance period of about 0.1% compared to a loan that capitalizes the interest once, at the end of the tolerance period.

Impact of the repayment term on the cost

The repayment term can have a big impact on the cost of a student loan.

When comparing the cost of two loans, consider both the monthly loan payments and the total payments over the life of the loan. Differences in repayment terms can affect the total interest paid over the life of the loan, not just the monthly loan payment.

A shorter repayment term will reduce the total loan repayments, but will increase the monthly loan payment. Likewise, a longer repayment term will reduce the monthly loan payments, but increase the total loan payments.

For example, a 5-year repayment term has total payments 11% lower than a 10-year repayment term, assuming an interest rate of 5%, but the monthly payments are more than three-quarters higher. A 20-year repayment term has monthly payments that are about a third lower than a 10-year repayment term, but total payments that are about a quarter higher. A 30-year repayment term halves the monthly payments compared to a 10-year repayment term, but increases total payments by more than 50%.

It is not always possible to use the same repayment term to compare loans with different interest rates. In a rising rate environment, fixed rate loans will require a shorter repayment term for lower interest rates.

Use a student loan calculator to compare both the monthly loan payment and the total payments over the life of the loan.

The annual percentage rate, or APR, combines the impact of the interest rate and fees for a specific repayment term. Although the APR is intended to make it easier to compare loans, the APR only works well when the two loans have the same repayment terms. When the repayment terms differ, the longer repayment term will result in a lower APR, even though the loan with the longer repayment term will cost more.

Shop for the best loans

The lowest advertised interest rate is not necessarily the interest rate you will get. In fact, more borrowers get the higher advertised interest rate than the lower. Only borrowers with excellent credit scores will qualify for the lowest interest rates.

Lenders don’t publish their interest rate formulas, so you’ll have to apply for multiple loans to find the one that gives you the best interest rate and fees.

Generally, federal student loans offer the lowest cost and the best combination of repayment terms for most borrowers. They are not dependent on the borrower’s credit scores or income, unlike private student loans. The Federal Stafford Unsubsidized Loan and Federal PLUS Loan are not dependent on demonstrated financial need. Even wealthy students can avail of these loans. The Federal Stafford loan is less expensive than the Federal PLUS loan.

Apply for private student loans with a creditworthy co-signer

Apply for a private student loan with a creditworthy co-signer.

Private student loans base eligibility and interest rates on your credit score and the credit score of your co-signer, whichever is greater. (Eligibility also depends on the borrower’s income, debt-to-income ratios, and length of employment with the borrower’s current employer.)

So, applying for a private student loan with a co-signer will not only increase your chances of getting the loan approved, but can also lower the interest rate.

Over 90% of private student loans for undergraduates required a creditworthy co-signer. These loans are approved on the basis of the credit of the co-signer, not that of the borrower, as most students have poor or no credit history.

There is, however, one caveat, which is the risk to the co-signer. Many parents mistakenly assume that co-signing a loan is giving the borrower a reference. But, it is much more than that. A co-signer is a co-borrower, also required to repay the debt. Lenders first ask the borrower for repayment, as a courtesy. But, as soon as the borrower is in arrears, the lender will start requiring the co-signer to make the loan payments.

Check Your Credit Reports Before Applying For A Private Student Loan

Errors in your credit reports can affect your credit score, which in turn affects the interest rates you pay.

Check your credit reports for errors before applying for a private student loan.

You can get your credit reports for free at annualcreditreport.com.

If you find any errors, you can correct them by disputing them. The lender has 30 days to correct an error or confirm its accuracy.

You should therefore check your credit reports at least 30 days before applying for a private student loan.


Source link

]]>