The Blue Crown Capital Management Specialists As interest rates rise

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The Blue Crown Capital Management Specialists As
interest rates rise
http//www.bluecrowncapital.com/news
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• Loans that provide a guaranteed fixed rate for a
  pre-defined period of time, then convert to a
  variable rate, are usually less expensive than
  traditional 30-year fixed loans.
• WASHINGTON Higher mortgage rates for 2014?
  Count on it. Could this be the year to check out
  hybrid mortgages, which haven't been popular
  lately? Maybe.

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You can count on interest rates going higher
because

• The Federal Reserve intends to continue reducing
  its monthly purchases of mortgage bonds and
  Treasury securities, which will have the side
  effect of raising rates.
• The national economy finally appears to be
  picking up steam, based on the latest quarterly
  data. Higher growth rates in turn will increase
  demand for available credit and probably nudge
  rates higher.
• New federal regulations for mortgage lenders
  aimed at avoiding another bust take effect Jan.
  10. Not only will loan officers and underwriters
  scrutinize applicants' income, debt ratios and
  credit extra carefully, they'll probably charge
  more for borrowers whom they see as a higher
  risk. Some mortgage economists predict that
  conventional 30-year, fixed-rate loans could go
  to 5.5 before year-end.

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• So what does this mean for you if you're thinking
  about buying a house or refinancing and you want
  to nail down the most favorable interest rate and
  terms? Should you shop primarily for a
  traditional mortgage product that guarantees you
  a specific rate for 15 to 30 years?
• Or should you check out what's also on the shelf
  in the way of hybrids loans that provide a
  guaranteed fixed rate for a pre-defined period of
  time, say five, seven or 10 years then convert
  to a rate that can change annually?
• The case for sticking with a traditional
  fixed-rate mortgage is straightforward. Though
  30-year rates are more than a percentage point
  higher this month than they were a year earlier,
  they are still not far off multi-decade lows.

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• Bruce A. Calabrese, president of Equitable
  Mortgage Corp. in Columbus, Ohio, is adamant "My
  advice for home buyers" in the new year, he said,
  "is to lock early into a 30-year fixed" while
  rates are still under 5. "Take a 30-year fixed
  at 4.75 and be happy" because that's still far
  below average rates over the last several
  decades.
• Paul Skeens, president of Colonial Mortgage Corp
  in Waldorf, Md., agreed. "If fixed rates are
  under 5.5 and you are going to live in your home
  for five years or more, they are still a great
  deal," he said. "I'm very partial to fixed rates
  since I remember when anything under 7 was a
  great deal.
• To illustrate Skeens' and Calabrese's historical
  point, consider these average annual 30-year
  fixed rates In 1974, they averaged 9.19
  nationwide, according to mortgage investor
  Freddie Mac. By 1984, they were at 13.88. In
  1994, fixed rates averaged 8.38 and in 2004,
  5.84.

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• But what if you say I don't care about what
  rates were in previous decades. I'm more
  concerned about being able to afford today's
  housing prices on today's income and household
  expenses.
• Jeff Lipes, a lender in the Hartford, Conn., area
  and former president of the Connecticut Mortgage
  Bankers Assn., said that hybrids with fixed rates
  for five to 10 years "are fantastic options for
  borrowers" in 2014, and can lock in rates that
  are one or more percentage points below competing
  30-year fixed loans.
• "Most first-time buyers purchase a home that will
  be sold when the family income increases or the
  family outgrows the house," Lipes said. "That
  usually occurs in the first 10 years, so that is
  why a hybrid is a great option. The borrower
  saves a lot of money" sometimes hundreds of
  dollars a month "paying a lower rate."

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• A check of Bankrate.com's online rate monitor in
  late December found five-year hybrids averaging
  around 3.4 nationwide, seven-year hybrids at
  3.81 and 10-year hybrids at 4.16. Thirty-year
  fixed-rate mortgages averaged 4.63.
• Ted Rood, senior mortgage consultant with
  Wintrust Mortgage in St. Louis, said he's already
  seeing a shift in demand toward five- and
  seven-year hybrids. He just closed a seven-year
  hybrid at 3.5 on a house in Wyoming for a
  borrower who fully understood the risk that he
  could face higher rates at the conversion point
  in late 2020.
• Bottom line for you if you're in the market
  Check out all the options on the menu. If you are
  comfortable with the potential risks, and the
  monthly savings advantages of a hybrid are
  substantial, go for it.