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The Mortgage Professor: No such thing as 'buy one, get one free'

Consumer / Home and Consumer News /

The food market closest to my home recently went out of business and was replaced by a supermarket chain. In most respects, the new store is an improvement over the one it replaced, except for one thing: Its pricing system is permeated by buy-one-get-one-free offers.

I went to the store recently to buy some blueberries, among other things. I ...Read more

The Mortgage Professor: Mortgage interest rate fundamentals

Consumer / Home and Consumer News /

The largest financial transaction most homeowners undertake is their home mortgage, yet very few fully understand how mortgages are priced. The main component of the price is the mortgage interest rate, and it is the only component borrowers have to pay from the day their loan is disbursed to the day it is fully repaid.

DEFINITION OF INTEREST ...Read more

The Mortgage Professor: Reverse mortgages: A strategy for seniors

Consumer / Home and Consumer News /

Many senior homeowners are attracted to the idea of using a reverse mortgage to draw additional funds, but are so fearful of making a costly mistake involving their house, or being taken advantage of by loan providers, that they are immobilized and do nothing. The three-step strategy described below is directed to them. It is risk-free because ...Read more

The Mortgage Professor: How to determine if refinancing your mortgage will pay off

Consumer / Home and Consumer News /

If you took out a mortgage with a 7.5 percent interest rate in 1994 and still have it, refinancing in a 3.5 percent market is a no-brainer; you don't need much analysis to know that refinancing into today's rates will pay. The only possible reason a borrower would still hold such a mortgage is a marked deterioration in his credit, the value of ...Read more

The Mortgage Professor: Do large principal payments reduce monthly payments?

Consumer / Home and Consumer News /

On home mortgages, a large payment to principal reduces the loan balance and with it the fully-amortizing monthly payment, or FAMP. FAMP is the level of monthly payment required to repay the mortgage fully over its remaining term. Many borrowers would like a mortgage on which the monthly payment would drop to the new, lower FAMP following a ...Read more

The Mortgage Professor: Do reverse mortgages work for owners of expensive homes?

Consumer / Home and Consumer News /

As a federally insured reverse mortgage program under the Federal Housing Administration, the home equity conversion mortgage program is not designed to help the wealthy. In calculating maximum draw amounts, the highest property value it will recognize is $625,500. If your house is worth $1 million or $10 million, you can't draw more than the ...Read more

The Mortgage Professor: Homebuyers lose a useful mortgage option to overzealous regulation

Consumer / Home and Consumer News /

Before the financial crisis, many mortgage contracts contained a provision stating that borrowers who paid off their loan early had to pay a penalty. Penalties were usually expressed as a percent of the outstanding balance at time of prepayment or a specified number of months of interest. In most cases, the penalties declined with the passage of...Read more

The Mortgage Professor: How to pay off a 30-year mortgage in 15 years without being scammed

Consumer / Home and Consumer News /

The 15-year fixed-rate home mortgage is far and away the best option for consumers because of the low interest rate. All other things the same, including originations fees, the 15-year rate in today's market is 0.75 percent below the 30-year rate.

I recently assessed a $240,000 loan to a borrower with a high credit score who will put 20 percent...Read more

The Mortgage Professor: Is making extra mortgage payments better than refinancing?

Consumer / Home and Consumer News /

Many mortgage borrowers at some point consider making extra payments or refinancing but are confused as to which would serve them better. This article is directed to them.

EXTRA PAYMENT DECISIONS VERSUS REFINANCE DECISIONS

While borrowers refinance for a variety of reasons, only refinancings undertaken to reduce the interest rate can be viewed...Read more

The Mortgage Professor: Should home sellers pay the settlement costs of buyers?

Consumer / Home and Consumer News /

Q: In an effort to sell my house, I agreed to pay up to $8,000 of the buyer's closing costs. Is there anything I can do to keep the amount as far below $8,000 as possible?"

A: At this point, no. If you agreed to pay "up to" $8,000 of the buyer's costs, you will almost surely end up paying $8,000 or very close to it.

WHY A SELLER'S COMMITMENT ...Read more

The Mortgage Professor: How to unleash the reverse mortgage market

Consumer / Home and Consumer News /

Last week's article indicated that the market for home equity conversion mortgages -- the federal government's reverse mortgage program -- is not a shoppers market because the product is not well-defined, the prices charged are obscure, and borrowers have no reason to be confident that the product selected will be delivered at the agreed-upon ...Read more

The Mortgage Professor: How to unleash the reverse mortgage market

Consumer / Home and Consumer News /

The need for a robust reverse mortgage market is large and growing. At the end of 2015, there were about 24 million homeowners ages 65 and older, and that number is growing by about a million each year.

The Center for Retirement Research at Boston College estimates that more than half of them "may be unable to maintain their standard of living ...Read more

The Mortgage Professor: Rent or buy? The question that never seems to go away

Consumer / Home and Consumer News /

Should you rent or buy?

The question never goes away because it is confronted anew by every new cohort of households. The letters I receive on the topic, such as the one below, haven't changed in the last 20 years:

"I am a 48-year-old divorced female. I have been renting for the last 10 years. ... My friends keep telling me that renting is '...Read more