Mortgage rates skyrocketing !
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
8yOwner occupant rate was 4.75% this past week, so yes those rates are in line. Skyrocketing isna bit of hyperbole with rates still on the very low end historically. In the mid 2000s when the owner occupant rated dipped to 6% most of us felt that was the lowest they would ever go in our lives.
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- Investor · Miami, FL · Member since 2015 · 1k+ posts · 390 votes8y
Originally posted by @Andrey Y.:
Hello all. Apparently, the best terms on an investment property are currently 5.25-5.375% with 25% down, and 5.75-5.875% with 20% down, this is with a 740++ credit score. 30 year fixed. This is what a reputable lender told me. Is this what you guys are seeing? Would love some recommendations for lenders you like that can do better. Out of my current investments, the worst rate is 4.5%.
Andrey, rates have been moving no doubt, but still this is pretty cheap money - In some markets to help encourage your portfolio growth you may want to consider forgoing the cash-flow and accelerating your amortization schedule, this will keep your rate a little lower and also will lessen the dilution of the rate while maintaining a decent present cash flow. This will also help build quicker equity, maybe resulting in a HELOC opportunity that you capture at a lower rate and re-invest some of the new equity across a few more homes. Once you have a good amount of homes collected, you can take them out with a single new Fannie or Freddie product that is designed as a fixed rate commercial style loans for multiple SFR.
- Investor · Miami, FL · Member since 2015 · 1k+ posts · 390 votes8y
Originally posted by @Calvin Lin:
Just closed on my new primary SFH in Cary, NC last week, 15 years at 3.625%, 0 points, Wells Fargo.
Calvin-
I just finished typing this information and you came in with the exact information I was proposing. Go with a 15 yr get the lower rate and the faster equity build, maybe have to take a small cashflow haircut today, but tomorrow you will be so happy you did it.
Across my personal portfolio, I have a variety of loan types and terms, the goal has always been to build equity, and in some cases it has meant to leave equity on the table due to low appraisals, leave cash flow to the wayside in an effort to get a better rate and a quicker paydown - only one focus in mind, buy and build a portfolio that is larfeg enough to send the kids to college when it times, have a retirement filled with fishing and golfing.
Maybe the real answer is that it doesnt matter what the rate is, as long as its not losing money and meeting your investment goals.
- Investor · Miami, FL · Member since 2015 · 1k+ posts · 390 votes8y
Originally posted by @Mark S.:
I closed about a month ago on a SFR. 20% down, 30-year fixed, 5.25% with 1.3 points (ended up being about $800 and breakeven was about 4.5 years). 800+ credit score.
Wow, I have not heard that term in a while "points" I thought this was a thing of the past, maybe I have been away from this to long, I have not pourchased a home with a conventional laon in some time, I try to stack as many homes as posisble and then go for the commercial style loan.
- Investor · Raleigh, NC · Member since 2015 · 81 posts · 210 votes8y
Originally posted by @Steven Gesis:
Originally posted by @Calvin Lin:
Just closed on my new primary SFH in Cary, NC last week, 15 years at 3.625%, 0 points, Wells Fargo.
Calvin-
I just finished typing this information and you came in with the exact information I was proposing. Go with a 15 yr get the lower rate and the faster equity build, maybe have to take a small cashflow haircut today, but tomorrow you will be so happy you did it.
Across my personal portfolio, I have a variety of loan types and terms, the goal has always been to build equity, and in some cases it has meant to leave equity on the table due to low appraisals, leave cash flow to the wayside in an effort to get a better rate and a quicker paydown - only one focus in mind, buy and build a portfolio that is larfeg enough to send the kids to college when it times, have a retirement filled with fishing and golfing.
Maybe the real answer is that it doesnt matter what the rate is, as long as its not losing money and meeting your investment goals.
Thanks Steven. I knew rate was going up this year so I locked in that rate in Nov of last year, a 8 months rate lock, it was a great decision.
- 8yMark S.Pro MemberRental Property Investor · KY · Member since 2013 · 1k+ posts · 537 votes
@Steven Gesis, it would have been about 5.875% with no points. I decided to buy it down. At the end of the day, probably not a huge difference either way.
- Cupertino, CA · Member since 2014 · 59 posts · 22 votes8ySteven Gesis - What you are proposing (foregoing cash flow) may not be practical for many people - assume if someone owns 10 properties and they all are -ve $300 cash flow, i.e., $3000/month out of pocket. How will that person going to manage his/her finances? Yes, some people can ride that no problem, but not everyone.
- Jersey City, NJ · Member since 2017 · 36 posts · 3 votes8y
I'd recommend you lock that 5.25% if you plan on closing soon. I felt lucky to have locked on 5.125% a few weeks ago on a day the stock market was having jitters. Unfortunately, that deal didnt work out so I had to back out but I think 5.25 w 25 down on 30 y is the norm these days and it won't be for long. My refinance is ways off but I'm hoping I can closer to 5 than 6% in a couple of months when I'm ready.
- Investor · Miami, FL · Member since 2015 · 1k+ posts · 390 votes8y
Originally posted by @Manish A.:
Steven Gesis - What you are proposing (foregoing cash flow) may not be practical for many people - assume if someone owns 10 properties and they all are -ve $300 cash flow, i.e., $3000/month out of pocket.
How will that person going to manage his/her finances? Yes, some people can ride that no problem, but not everyone.Are you saying you have 10 rentals that negative cash flow every month? That would result in a $36000 annual loss - ??
What I was saying is that people may want to consider taking a haircut or foregoing cashflow in the case you lock a really cheap 15 yr. and just do it for the quick equity capture.
- New York, NY · Member since 2018 · 15 posts · 23 votes8yThat’s what I’m seeing, locked in 30 year with 25% down 5.5% I have A1 credit . We are going to have to just come up with creative ways to get higher rents from our tenants.
- Real Estate Agent · Washington, D.C. · Member since 2018 · 70 posts · 27 votes8y
Just got quoted for 5.8% with 20% down on an investment property in Baltimore last weekend. I got a 4.1% FHA loan last July for my primary residential property. >740 Credit.
- Investor · The Creek, WV · Member since 2014 · 890 posts · 1k+ votes8y
I just got a commercial loan through my local bank. 20% down and 6.3% interest.
- Rental Property Investor · Springfield, MO · Member since 2017 · 266 posts · 312 votes8y
I lost my plug nickel, but here are my 2 cents on what factors will affect the housing market and rates in the coming years.
1. https://www.bizjournals.com/bizwomen/.../national-....
Mar 14, 2018 - Americans now collectively owe more than $1 trillion in credit card debt for the first time in history, according to WalletHub's recent Credit Card ..
2.Total outstanding federal and private student loans: $1.5 trillion.
https://www.nerdwallet.com/blog/loans/student-loan...
3. The average American worker will see 1% or less growth in income in 2018
http://money.cnn.com/2017/12/12/pf/pay-salary-work...
4. Feb 19, 2018 - The value of the dollar today is much less than it was in the past
https://www.thebalance.com › Investing › US Economy › Trade Policy › U.S. Dollar
5. Estimating Returns To 2020 And Beyond, Update Jan.-2018. Feb. ... Based on its historic trend, the stock market appears to be overvalued.
https://seekingalpha.com/.../4145425-deja-vu-2007-...
None of these articles talk about the housing market. Mention of interest rates is for current credit cards, student loans, and mortgages (not future rates).
Any one or more of these "bubbles" could / will create other national crises.
Depending on your source, the average 30-year-old college grad has between 6-15K in credit card debt, 46K ( my two kids total 120K) in students loans and 133K in home mortgage.
1 in 3 people over 50 have less than 50K saved for retirement. 1 in 5 have nothing saved for retirement and are tens of thousands in debt.
Lucky I have free and clear properties. I will need them for my parents and children. ;-}
- Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes8y
Originally posted by @Guy Yoes:
I lost my plug nickel, but here are my 2 cents on what factors will affect the housing market and rates in the coming years.
1. https://www.bizjournals.com/bizwomen/.../national-....
Mar 14, 2018 - Americans now collectively owe more than $1 trillion in credit card debt for the first time in history, according to WalletHub's recent Credit Card ..
2.Total outstanding federal and private student loans: $1.5 trillion.
https://www.nerdwallet.com/blog/loans/student-loan...
3. The average American worker will see 1% or less growth in income in 2018
http://money.cnn.com/2017/12/12/pf/pay-salary-work...
4. Feb 19, 2018 - The value of the dollar today is much less than it was in the past
https://www.thebalance.com › Investing › US Economy › Trade Policy › U.S. Dollar
5. Estimating Returns To 2020 And Beyond, Update Jan.-2018. Feb. ... Based on its historic trend, the stock market appears to be overvalued.
https://seekingalpha.com/.../4145425-deja-vu-2007-...
None of these articles talk about the housing market. Mention of interest rates is for current credit cards, student loans, and mortgages (not future rates).
Any one or more of these "bubbles" could / will create other national crises.
Depending on your source, the average 30-year-old college grad has between 6-15K in credit card debt, 46K ( my two kids total 120K) in students loans and 133K in home mortgage.
1 in 3 people over 50 have less than 50K saved for retirement. 1 in 5 have nothing saved for retirement and are tens of thousands in debt.
Lucky I have free and clear properties. I will need them for my parents and children. ;-}
You didn't mention how all that will affect rates and the housing market.
Last I checked, there are supply limitations in many markets. Also, we have the largest renters percentage in 60 years. I believe this will only increase over time, since increasing mortgage rates will only encourage renting.
Personally, I don't have student or credit card debt. I have basic financial independence and a solid income. How will all this affect me? I would actually sooner hold cash than pay down rentals. Too many advantages in leveraged real estate.
- Rental Property Investor · San Diego, CA · Member since 2017 · 86 posts · 14 votes8y
Hello ... How about investing in MF in Chicago in up and coming neighbour hood for a good cash flow to residents of medica teaching facility in the area?
- Rental Property Investor · Springfield, MO · Member since 2017 · 266 posts · 312 votes8y
How will it not affect everyone? Over 2.5 Trillion in credit card debt and student loans alone (and getting bigger). Debt for car loans is also at an all time high. Credit will dry up and people will not be able to borrow money , but will still have to pay what they owe. What happens when they default on their credit cards and car loans (you can't default on student loans)? Who owns the credit cards... Banks. Who get bailed out....Banks. Who is on the hook for the bailouts....not the Banks. Our country is more than broke. Free food, subsidized housing and health care. Who do you think pays for all this? Not the people who get the free stuff. The working class does. What happens when the working class can no longer pay for those who don't work?
The recession is toast. Soon the US dollar will no longer rule the lands. Prepare for the fun of inflation. Wages are stagnant but the price of goods continue to go up. Higher prices cost everyone. It hurts the elderly and the poor. It hurts the single moms and those on fixed incomes. It will affect homeowners and landlords who have to repair properties and pay higher property taxes and insurance. You can only raise rents so high until they can't afford your property.
Why are you holding cash? Inflation will eat it up. Is the money in the bank making more than the interest paid on mortgage? The theme on bigger pockets is to use your equity to buy more and more. Big rewards? Maybe. Big risk? definitely. To me, leverage means I owe more than I'm worth.
My rentals (and everything else) are paid for and I get comments I'm doing REI all wrong. They cash flow extremely well and the money I make from them I invest in other REI areas. I get a 10%+ return on the money instead of paying 3-5% in interest. I don't care if interest rates go up or down, I don't pay any interest. I'd be happy if the bank paid 15-20% for CDs.
But, we are no longer a country of savers. Americans are slaves to the companies, banks and people we owe money, and they dictate our actions.
Housing prices will go up and down as will interest rates. They should reflect the soundness of the markets. My point was that what happens in one market effects all the others in some way. Natural disasters, financial bubbles, military conflicts and politics will always have an effect on your RE business.
- Dallas, TX · Member since 2016 · 1k+ posts · 745 votes8y
Originally posted by @Andrey Y.:
Originally posted by @Russell Brazil:
Looks like a totally inverse relationship. Rising rates usually leads to lower home values. Do you think picking up a couple Turnkey properties right now may not be the best idea?
Look, I am not a fan of the turnkey concept, especially in this market, but if you are a buy and hold investor and the property definitely cash flows now, they honestly why do you care about the price of the property?
real estate prices only matter if you want to buy or sell. 10 years from now I have a HIGH confidence that property values will be higher, and honestly, buying now and locking in 30 year rates at 5 or 5.25% will make you look like a genius if rates go back to 7%, or 8% or more.
- All Over, USA · Member since 2017 · 689 posts · 756 votes8y
Originally posted by @Andrey Y.:
Originally posted by @Russell Brazil:
Originally posted by @Andrey Y.:
Originally posted by @Russell Brazil:
Originally posted by @Andrey Y.:
Originally posted by @Russell Brazil:
Looks like a totally inverse relationship. Rising rates usually leads to lower home values. Do you think picking up a couple Turnkey properties right now may not be the best idea?
I figured people would see what they want there. There is about a dozen points that show an inverse relationship and a dozen other points that show the opposite in that chart. Also note, that the home prices on the chart are inflation adjusted, which doesnt show the best information as interest rates are a factor and responsive to inflation.
If there was an inverse relationship, you should be able to flip one of them over and have the same exact shape. But there are many areas that simply do not correspond. Such as prices rising 250% in the late 70s during a rising interest rate enviorment, we also see the spike in interest rates in about the 90s on this chart at the same time as a spike in interest rates.
I agree, there are many areas that show an inverse relationship and many areas that show no correlation or direct correlation during very short periods. However, the "general trend" is obviously an inverse one. If you showed the graph to a clueless high school student, they would come to that same conclusion.
1890 --> 1920 INVERSE (clear)
1920 --> 1970 INVERSE (clear)
1970 --> 1995 High interest rates but flat prices adjusted for inflation (no correlation)
1995 --> 2010 INVERSE (clear)
I don't think you could argue with the data. In general, there is an inverse correlation. I don't think you need to be a math whizz to see it.
Well then you should easily then be able to do what John Paulson did and make yourself $5 billion by shorting housing in the coming years. Let me know how it works out.
I don't think being cynical helps anybody. Also, I have no clue if interest rates will go to 6% and stop there, or just keep going straight up. Do you?
Also, I have no desire or time to undertake shorting the market. I am a physician, not a computer/engineer/finance nerd. I am happy with my income and job, and have zero interest in "shorting" anything :)
Confused, what does sticking your money where your mouth have to do with being a “computer/engineer/finance nerd”?
- Earth · Member since 2017 · 297 posts · 187 votes8y@Manish A I had a similar negative cash flow situation a few years ago. A few years ago, originally I had about 10 rental total positive cash flow $2000 to $3000 per month. Then I purchased 20 additional properties using leverage, each of those 20 properties was $100 negative cash flow per month. 20 properties means $2000 negative cash flow per month. But my original first 10 properties was about $2000 to $3000 positive cash flow per month. Overall, all 30 properties was about zero (break even) cash flow a few years ago. I had my W-2 income at that time. Today, a few years later, rent have been raised a lot, all 30 properties are positive cash flow. Positive income coming in each month now. I quit my W-2 job one year ago.
- Earth · Member since 2017 · 297 posts · 187 votes8yI purchased those 20 additional properties using hard money loans a few years ago.
- Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes8y
Originally posted by @Aaron Hunt:
Originally posted by @Andrey Y.:
Originally posted by @Russell Brazil:
Originally posted by @Andrey Y.:
Originally posted by @Russell Brazil:
Originally posted by @Andrey Y.:
Originally posted by @Russell Brazil:
Looks like a totally inverse relationship. Rising rates usually leads to lower home values. Do you think picking up a couple Turnkey properties right now may not be the best idea?
I figured people would see what they want there. There is about a dozen points that show an inverse relationship and a dozen other points that show the opposite in that chart. Also note, that the home prices on the chart are inflation adjusted, which doesnt show the best information as interest rates are a factor and responsive to inflation.
If there was an inverse relationship, you should be able to flip one of them over and have the same exact shape. But there are many areas that simply do not correspond. Such as prices rising 250% in the late 70s during a rising interest rate enviorment, we also see the spike in interest rates in about the 90s on this chart at the same time as a spike in interest rates.
I agree, there are many areas that show an inverse relationship and many areas that show no correlation or direct correlation during very short periods. However, the "general trend" is obviously an inverse one. If you showed the graph to a clueless high school student, they would come to that same conclusion.
1890 --> 1920 INVERSE (clear)
1920 --> 1970 INVERSE (clear)
1970 --> 1995 High interest rates but flat prices adjusted for inflation (no correlation)
1995 --> 2010 INVERSE (clear)
I don't think you could argue with the data. In general, there is an inverse correlation. I don't think you need to be a math whizz to see it.
Well then you should easily then be able to do what John Paulson did and make yourself $5 billion by shorting housing in the coming years. Let me know how it works out.
I don't think being cynical helps anybody. Also, I have no clue if interest rates will go to 6% and stop there, or just keep going straight up. Do you?
Also, I have no desire or time to undertake shorting the market. I am a physician, not a computer/engineer/finance nerd. I am happy with my income and job, and have zero interest in "shorting" anything :)
Confused, what does sticking your money where your mouth have to do with being a “computer/engineer/finance nerd”?
It means that in order to short the real estate market, its not as simple as snapping your fingers and *poof* there you go. You would have to be one of those things, likely an ultra version of it, to have the logistics and know how to actually do it. I am not, nor do I want to become one of those to get the knowhow to do so.
- Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes8y
It hasn't gotten quite that high for me, but they have risen. It's something we all have to get used to.
- 8yRaymond J. RodriguesBusiness MemberLender · Miami, FL · Member since 2017 · 1k+ posts · 797 votes
@Bobby Woell wow that’s a pretty steep rate for an investment property. Are you in florida??
Helm Mortgage Corp.5127 Reviews - Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes8y
Originally posted by @Steven Gesis:
Originally posted by @Calvin Lin:
Just closed on my new primary SFH in Cary, NC last week, 15 years at 3.625%, 0 points, Wells Fargo.
Calvin-
I just finished typing this information and you came in with the exact information I was proposing. Go with a 15 yr get the lower rate and the faster equity build, maybe have to take a small cashflow haircut today, but tomorrow you will be so happy you did it.
Across my personal portfolio, I have a variety of loan types and terms, the goal has always been to build equity, and in some cases it has meant to leave equity on the table due to low appraisals, leave cash flow to the wayside in an effort to get a better rate and a quicker paydown - only one focus in mind, buy and build a portfolio that is larfeg enough to send the kids to college when it times, have a retirement filled with fishing and golfing.
Maybe the real answer is that it doesnt matter what the rate is, as long as its not losing money and meeting your investment goals.
In reading this thread, it is clear that many are very passionate about their opinions on the subject of interestvrates, terms, equity building, etc. I honestly do not believe there is a one size fits all answer for anyone, in fact, I would argue that the answer depends on what is bet for each individual. The argumentbof going with 15 year term loans rather than a 30 year to save in interest rates, thereby saving in total interest paid and building equity faster is not an argument I agree with personally and here is why: At the current 30 year rates, I am confident that any savings in interest on a 15 year term loan would be made quite faster by using the cash on hand to reinvest in cash producing assets with higher yields than the cost of the loan. For me, I would rather own more doors at safe leverage levels than own less doors owned free and clear. While not having a mortgage payment is nice, I see it more as a waste of opportunity. With a 30 year loan, one can always simple pay more towards it to reduce the loan time and interest costs but with a 15 year term, you have eliminated some options. Again, this is Justin an opinion and to each his own is my message.
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