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News Briefs

A ‘Greenery-Filled Terrarium’ Will Be at the Center of New ODA Skyscraper in Seoul

An expansive “sky garden” will sit at the middle of Terrarium Cheong-Dam, a new skyscraper in Seoul, South Korea, designed by architecture studio ODA. The 45-story, 200-meter tower will be built in the city’s Gangnam district and will have a mix of high-end residences and offices. The semi-private sky garden, which ODA refers to as a “terrarium,” will cut through the center of the modern building. Plus, the skyscraper will sit on a podium with a public park. The addition of the greenery is intended to enhance the surrounding urban landscape. Dezeen

U.S. Mortgage Rates Hit a 23-Year High

The interest rate for a 30-year fixed-rate mortgage has hit its highest level since September 2000, following the seventh consecutive weekly increase. Now at 7.9%, the highest interest rate in 23 years is driving mortgage applications to a 28-year low. “Mortgage activity continued to stall, with applications dipping to the slowest weekly pace since 1995,” MBA vice president and deputy chief economist Joel Kan said. “These higher mortgage rates are keeping prospective home buyers out of the market and continue to suppress refinance activity.” Reuters

U.K. Landlords Threaten to Quit Over Proposed Renters’ Reform Bill

More than half of landlords in the U.K.—54%—said they would consider quitting because of the proposed Renters’ Reform bill, which is now getting a second reading. One out of five landlords said abolishing no-fault evictions is one of the least attractive elements of the reform bill, as it is currently the only way to quickly evict tenants. “It’s important that landlords are given the time and information they need to prepare for significant upheaval in the coming years, so they can continue to provide much-needed housing for almost five million households nationwide,” said Alan Thomas, U.K. chief executive at Simply Business. PropertyWire

Danny McBride Lists Hollywood Penthouse for $1.8 Million

Actor and screenwriter Danny McBride is parting with his longtime Hollywood condo, which is now on the market for $1.8 million. McBride, who created the HBO comedy shows “Eastbound & Down,” “Vice Principals” and “The Righteous Gemstones,” purchased the duplex penthouse in 2009 for a little more than $1.4 million. The home, which has previously been listed both on the sales and rental markets, sits on the 10th floor of the landmarked Broadway Hollywood and overlooks the Hollywood Sign and the Capital Records Building. Spanning almost 2,200 square feet, the penthouse has double-height ceilings, one bedroom and two bathrooms. McBride and his family have primarily lived in Charleston, South Carolina, since 2017. Robb Report

Source: mansionglobal.com

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With the holiday shopping season fast approaching, a simple addition to your catalog can go a long way: gift cards.

Unlike other types of inventory, gift cards are cheap to produce, easy to ship and unlikely to be returned. If you offer digital gift cards, you can’t run out — and you can keep making sales until a few minutes before gifts are exchanged.

“People love giving gift cards,” says Rachel DeCavage, owner and creative director at Cinder + Salt, an eco-friendly clothing company based in New England. “It’s a no-brainer way for them to give someone something that they’re going to love.”

People love getting them, too. In an October survey from the National Retail Federation, 55% of respondents said they hope to get a gift card as a present this year.

Here’s how you can make gift cards part of your holiday strategy, whatever you sell.

1. Create your gift cards

You may be able to order physical cards or offer digital ones through your e-commerce platform or point-of-sale system. Physical cards typically cost less than $2 per card, and digital cards are often free.

Physical cards are more popular gifts for Chicago-based indoor golf facility The Green, says founder and managing partner Connor Ptacin.

During the holidays, Ptacin estimated his team mails out “like 20 gift cards a week” to people who want to give their loved ones something physical.

Digital cards let you keep making sales until the very last minute. DeCavage says she usually sees a rush of gift card orders “like three days before a holiday.”

The right mix of digital and physical cards depends on your customers. If most of your sales take place in person, physical cards may be more popular. But if more of your customers shop online and you tend to ship orders farther away, or if you’re trying to grow your online sales, lean into digital cards.

2. Promote them as gifts

Display gift cards by your register and prominently on your e-commerce website to catch shoppers’ eyes.

“Just pop it right there on the counter and drive the impulse purchase,” says Jay Jaffin, chief marketing officer at Blackhawk Network, which helps retailers create and sell gift cards and other rewards items.

You can use gift cards to encourage other spending. This year, DeCavage is offering gift cards as bonuses to customers who spend more than a certain amount at Cinder + Salt.

“It could be an incentive for them or it could be something they can give to someone else, and it also feels like they’re getting a discount,” DeCavage says.

Make sure your cashiers know how to load gift cards using your point-of-sale system and how to package them. Those transactions give your staff the opportunity to make additional sales, too: DeCavage encourages gift card buyers to add something small, like a sticker, so it’s more exciting for the recipient to open.

“We try to make it a part of the shopping experience for people who are really unsure about what to get,” DeCavage says.

Promote gift cards on social media and via email, too. A well-timed online marketing campaign can remind previous customers that you have gift cards available — especially if you can reach last-minute shoppers at the right moment.

Lastly, Ptacin recommends swapping gift cards with other local businesses that serve similar audiences. That can help you reach new customers who might have just needed a push to visit you.

3. Prepare for redemptions

If you sell enough gift cards, you might reduce the intensity of another post-New Year’s headache: returns.

“A lot of times, what you see is a bunch of returns at the beginning of the year,” Jaffin says. “Sometimes, those gift cards can actually help balance that out — that first-quarter lull.”

Shoppers usually spend more than what’s on their gift cards, Jaffin adds.

DeCavage says gift card shoppers often behave differently. Instead of making a beeline for their desired item, they tend to spend lots of time browsing.

“For small retailers, gift card programs can really be a low-maintenance and affordable way to compete against larger stores,” Jaffin says, “while also helping to acquire new customers and encourage repeat foot traffic.”

Source: nerdwallet.com

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Warning that the housing market is contracting again as today’s mortgage rates hover near 8%, Wells Fargo economists wrote in a new analysis that rising borrowing costs “stand to tip the housing sector back into a recession.”

The “ominous” special commentary posted Thursday, according to a Wells Fargo news release, states prospects for a housing rebound are dimming as mortgage rates tighten their grip on the already sharp U.S. housing affordability issues.

Even though the economy has shown “a remarkable degree of resilience” this year — and a strong labor market along with moderating inflation has “raised hopes that the U.S. economy can avoid a recession — the same can’t be said for the real estate market. Unfortunately, not every sector of the economy has been as sturdy in the face of rising debt costs,” the Wells Fargo economic group wrote.

“After generally improving in the first half of 2023, the residential sector now appears to be contracting alongside the recent move higher in mortgage rates,” they continued. “Although mortgage rates may gradually descend once the Federal Reserve begins to ease monetary policy, financing costs are likely to remain elevated relative to recent norms.”

The commentary comes days after Goldman Sachs analysts also issued a downgraded housing forecast, predicting “higher for longer” mortgage rates will continue to squeeze home inventory and yet home prices will stay in the green, though growth will be slight as sales slow even more.

It also comes a day after the Federal Reserve Bank of Atlanta posted an update to its Home Ownership Affordability Monitor, showing housing affordability sank to a “new record low” in August due to still stubbornly high prices and rising interest rates.

In yet another month of declines, the monitor index score sank to 67.3 in August with a national median home price of $377,500, a median income of $76,621, a total median monthly payment of $2,848 and an interest rate of 7.1%. The Atlanta Fed estimated the annual total payment share of median income to be 44.6%, well over the recommended 30% of income for housing costs.

Compare that score to a score of 112.3 in November 2012, when the median home price was $197,333, median income was $52,161, and the interest rate was 3.4%.

This latest affordability reading was back in August, before interest rates inched closer to 8%, hitting that threshold last week before tipping down only slightly, according to Mortgage News Daily.

This “higher for longer” interest rate climate is likely to “not only weigh on demand, but could also constrain supply by reducing new construction and discouraging prospective sellers carrying low mortgage rates from listing their homes for sale,” Wells Fargo economists wrote.

The bank’s analysts also downgraded their home price forecast, though now they expect a “slightly softer pace of home price appreciation in the years ahead.” Because high interest rates are expected to continue to both dampen demand and constrain supply, they predict those dynamics will continue to buoy home prices slightly.

“Higher financing costs are likely to both weigh on demand and constrain supply, which will allow home prices to maintain a positive trajectory,” Wells Fargo economists wrote, predicting the S&P Case-Shiller National Home Price Index to increase 1.8% in 2023 and 2.5% in 2024.

The economic group also predicts a “downshift” in new residential construction starts, with multifamily permits already declining sharply in recent months.

“The recent drop in home builder confidence is evidence that single-family construction may begin to moderate as higher mortgage rates test builders’ ability to offer rate buy-downs to attract new buyers,” they wrote. “That noted, a structural shortfall of single-family supply will likely continue to boost new development.”

Source: deseret.com

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Today we’ll check out another home builder’s in-house mortgage lender, this time KB Home’s “KBHS Home Loans.”

As the name suggests, they are the affiliated lender for home builder KB Home, a SoCal-based company that has been around since the 1950s.

KB Home has a big home building presence in its home state, along with nearby Arizona and Nevada, Texas, and Florida.

To facilitate the sale of their homes, they lean on KBHS Home Loans to streamline the financing process.

What’s perhaps more interesting is that they are backed by another lender, Guaranteed Rate, which is a top-10 lender nationally.

KBHS Home Loans Fast Facts

  • In-house mortgage lender for parent company KB Homes
  • Founded in 1957, headquartered in Los Angeles, CA
  • Parent company is publicly traded (NYSE: KBH)
  • Licensed to lend in 10 states nationwide
  • Funded nearly $3.5 billion in home loans last year
  • Most active in California, Florida, and Texas
  • Also have an affiliated insurance agency and title company

KBHS Home Loans is the in-house mortgage lender for parent company KB Homes.

They primarily offer home purchase loans to the buyers of their newly-built homes located throughout the country.

The Southern California based home builder has been around since 1957, having previously been named after founders Eli Broad and Donald Kaufman as the “Kaufman and Broad Building Company.”

One of their claims to fame is the creation of the “Townehouse” design, intended to woo consumers who would typically rent instead of buy a home.

The company later changed its name to KB Home in 2001 and today refers to itself as the “#1 customer-ranked national homebuilder.”

That’s based on TrustBuilder ratings and reviews that are powered by NewHomeSource, a site that apparently lists honest reviews from real homeowners.

Anyway, KB Home established its own mortgage company back in 1965, and that eventually morphed into what is now KBHS Home Loans.

Interestingly, KBHS Home Loans was formed in 2016 as a joint venture between KB Home and Stearns Lending.

Stearns Lending was acquired by Guaranteed Rate in early 2021.

This explains the disclaimer on their website that says all loan programs subject to Guaranteed Rate, Inc. underwriting guidelines.

They are licensed in 10 states nationwide, including Arizona, California, Colorado, Florida, Idaho, North Carolina, Nevada, South Carolina, Texas, and Washington.

Last year, the company funded a solid $3.5 billion in home loans, with a good chunk of it coming from their home state of California.

They were also quite active in Arizona, Colorado, Florida, Nevada, and Texas, where they have home building operations.

KBHS Home Loans prides itself on being a fully-integrated, dedicated mortgage lender for KB Home, with daily collaboration to ensure things keep moving along on schedule.

Like other home builders, they also have an affiliated insurance company, KB Home Insurance Agency, and title insurance business, KB Home Title Services.

How to Apply with KBHS Home Loans

To get started, you can either visit a new home community or surf on over to the KBHS Home Loans website.

If you do the latter, they have an online loan officer directory and a contact form if you prefer for someone to reach out directly.

There is also a learning center with a mortgage glossary, free mortgage calculator, informative videos and articles, and a FAQ section.

When you’re ready to apply, you can do so electronically via their digital loan application from a computer, tablet, or smartphone.

It allows you to complete the process mostly paperlessly, with the ability to link financial accounts (bank, employer, etc.) and securely upload documentation.

Once your loan is submitted, you’ll be able to log in to the borrower portal 24/7 to check loan status, satisfy outstanding conditions, or get in touch with your lending team.

KBHS Home Loans loan officers also have the ability to screen share in real-time if you need extra help you complete any step of the mortgage process.

When it comes time to fund, their so-called FlashClose process allows borrowers to sign most of their closing documents electronically.

This means you can digitally review and share documents in advance with your attorney or settlement agent and spend less time at the closing table.

Loan Programs Offered by KBHS

  • Home purchase loans
  • Conforming loans
  • Jumbo loans
  • FHA loans
  • VA loans
  • USDA loans
  • Fixed-rate mortgages: 30-year fixed, 15-year fixed
  • Adjustable-rate mortgages: 5/1 ARM, 7/1 ARM

KBHS Home Loans offers all the usual products you expect to see from a mortgage lender, though they primarily focus on home purchase loans.

This includes conforming loans, jumbo loans, and the full suite of government-backed loans including FHA loans, VA loans, and USDA loans.

One thing that stands out with KBHS Home Loans is their adjustable-rate mortgage offerings.

They advertise ARMs more than other lenders and seem to have more options in this department.

So if you think mortgage rates will come back soon within the next 5-7 years, a hybrid ARM such as the 5/6 ARM or 7/6 ARM could be a good bridge.

Of course, they also offer fixed-rate mortgages as well, including the 30-year fixed and 15-year fixed.

And it might be possible to take advantage of a big rate buydown to keep your monthly payments down.

Many home builders have been offering big incentives lately as mortgage rates inch closer to 8%.

Those who use the builder’s lender may be entitled to special offers that likely won’t be found elsewhere.

KBHS Mortgage Rates and Lender Fees

I couldn’t find any information on their website regarding mortgage rates or lender fees. But they did have a special rate offering on the KB Home website.

It was a 7/6 ARM priced about two percentage points below the going rate for a 30-year fixed. So for those willing to go with an ARM, it presents a pretty big discount.

And it’s fixed for the first 84 months, giving the home buyer some breathing room before they need to consider a refinance, home sale, etc.

Typically, home builders offer mortgage rate buydowns, such as a 2-1 buydown, but perhaps those are becoming too expensive and there’s a shift to ARMs happening.

It’s unclear what their fixed mortgage rates are like so you’ll need to inquire about pricing when you speak to a loan officer.

As always, take the time to shop around with other non-affiliated banks, lenders, credit unions, and mortgage brokers.

It’s good to see what’s out there and gain some bargaining power in the process. You never want to look like you don’t have other options

KBHS Home Loans Reviews

KBHS Home Loans has a 4.9/5-star rating from over 3,000 Google reviews, which is impressive on both the review count and the score.

There are a lot of shining reviews from new home buyers, but also some poor reviews as well. You can filter by highest and lowest rating to see what other’s experiences were.

Their parent company, the home builder, has a 4.5/5 on NewHomeSource from nearly 9,000 customer reviews.

Over at the Better Business Bureau (BBB) website, they have an ‘A+’ rating based on complaint history, but a 1.08/5 rating based on the 84 customer reviews there.

They also have over 300 complaints over the past three years, including more than 170 over the past 12 months.

This is one of the challenges of running a home builder division and a mortgage lending division. It’s hard to make people happy in just one of those lines of business.

But if everything goes according to plan, they might be able to offer special incentives you might not find with other lenders or existing home sellers.

The biggest perk to using a home builder’s lender at the moment is the potential for a bought down rate.

Often, builders will offer big rate discounts to get you into a new home, or offer closing cost credits, or both.

This can ease affordability but some argue it’s at the expense of a higher sales price.

Regardless, do your research, gather quotes from outside banks/lenders, and take the time to negotiate.

While the process could be more streamlined with an affiliated lender/builder, don’t sacrifice price in the process. After all, the mortgage could stay with you a lot longer than the ~45 days it takes to get it.

KBHS Home Loans Pros and Cons

The Good Stuff

  • Can apply for a home loan online or in-person
  • Offer a digital process and hybrid remote closing
  • All major loan programs available including jumbos and ARMs
  • Financing specials including special rates for KB Home buyers
  • Excellent customer reviews from thousands of past customers
  • A+ BBB rating
  • Mortgage calculator and how-to videos and guides on their website
  • Free smartphone app

The Perhaps Not

  • Do not list their mortgage rates or lender fees online
  • Not licensed in all states
  • Only for home buyers
  • No second mortgages or home equity products

Source: thetruthaboutmortgage.com

The Federal Housing Finance Agency (FHFA) will revise the treatment of active single-family mortgages backed by government-sponsored enterprises Fannie Mae and Freddie Mac for which borrowers elected a COVID-19 forbearance under the Enterprises’ representations and warranties framework, according to its newest media release.

“Under the updated rep and warrant policies, loans for which borrowers elected a COVID-19 forbearance will be treated similarly to loans for which borrowers obtained forbearance due to a natural disaster,” the FHFA said. “As a result, loans with a COVID-19 forbearance will remain eligible for certain rep and warrant relief based on the borrower’s payment history over the first 36 months following origination.”

FHFA Director Sandra L. Thompson argued that homeowners, who needed more time to keep up with housing costs during the pandemic, benefited from a mortgage forbearance plan that would reduce or suspend mortgage payments.

“Forbearance was an invaluable tool for borrowers experiencing financial hardship due to the COVID-19 pandemic,” Thompson said. “Servicers went to great lengths to implement forbearance quickly amid a national emergency, and the loans they service should not be subject to greater repurchase risk simply because a borrower was impacted by the pandemic.”

The Enterprises’ existing rep and warrant policies with respect to natural disasters allow the time the borrower is in forbearance to be included when demonstrating a satisfactory payment history in the first 36 months following origination, the FHFA noted. These policies will now expand to loans for which borrowers elected a COVID-19 forbearance.

Thompson stressed the importance of helping current and prospective homeowners manage present housing conditions at the Mortgage Bankers Association Annual Convention last week.  “In a housing market like this one, it is all the more important that both our policies and the industry’s efforts align to support existing and aspiring homeowners,” Thompson said. “That is why I believe a model based on partnership and mutual feedback is necessary for us to achieve our shared goal of promoting affordable and sustainable housing opportunities.”

If you’re considering becoming a homeowner, it could help to shop around to find the best mortgage rate. Visit Credible to compare options from different lenders and choose the one with the best rate for you.

MORTGAGE RATES KEEP CLIMBING, BUT BUYERS CAN FIND THE BEST DEALS BY DOING THESE TWO THINGS: FREDDIE MAC 

Mortgage rates affecting affordability, buyers advised to build up down payments

Mortgage rates are continuing their ascent. The average 30-year fixed-rate mortgage rose to 7.63% for the week ending Oct. 19, according to the Freddie Mac’s latest Primary Mortgage Market Survey. This time in 2022, the 30-year fixed-rate was below 7%. 

Buyers may do well for themselves by browsing for the best home loans and making a considerable down payment. Freddie Mac’s Chief Economist Sam Khater said “in this environment, it’s important that borrowers shop around with multiple lenders for the best mortgage rate.”

Freddie Mac announced last week the launch of DPA One®, a new tool that strives to help mortgage lenders quickly find and match borrowers to down payment assistance programs nationwide. 

“DPA One delivers a one-stop shop at no cost that brings lenders and their borrowers greater detail and visibility into these programs, while seamlessly connecting the right assistance program with the lender, housing counselors and borrowers who need this assistance the most,” Sonu Mittal, Freddie Mac’s senior vice president of and head of single-family acquisitions, explained.

“With research showing down payment is the single largest barrier to first-time homebuyers attaining homeownership, borrowers should also ask their lender about down payment assistance,” Khater said.

If you’re looking to buy a home, you could still find the best mortgage rates by shopping around. Visit Credible to compare your options without affecting your credit score.

MANY AMERICANS PREPARING FOR A RECESSION DESPITE SIGNS THAT SAY OTHERWISE: SURVEY

Housing market showing lackluster activity

By end of 2023, there is likely to have been around 4.1 million existing home sales in the U.S., which would mark the weakest year of home sales since the Great Recession of 2008, according to a Redfin report. 

Redfin’s Economic Research Lead Chen Zhao said current conditions have led to buyer and seller hesitancy across the board. 

“Buyers have been in a bind all year,” Zhao said. “High mortgage rates and still-high prices are making it harder than ever to afford a home, shutting many young people out of homeownership and causing homeowners to reevaluate whether 2023 is the right time to move. Mortgage rates are staying high longer than anticipated, keeping away everyone except those who need to move and pushing our sales projection for the year down to a 15-year low.

“The last time home sales were this low was during the Great Recession,” Zhao continued.

Redfin agents suggest that buyers invest in newly built properties which are performing more strongly than existing-home sales. Newly constructed homes saw sales increase 1.5% year-over-year in September as prices dropped about 4%, according to Redfin’s data. 

Based on the findings from a National Association of Realtors (NAR) report, the total amount of home sales decreased by 2% from August to September and have dropped 15.4% since September 2022.

Looking to reduce your home buying costs? It may benefit you to compare your options to find the best mortgage rate. Visit Credible to speak with a home loan expert and get your questions answered.

AFFORDABILITY KEEPING YOU FROM OWNING A HOME? HERE’S HOW YOU CAN GET READY

Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

Source: foxbusiness.com

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Average mortgage rates on 30-year fixed home loans continued their march towards 8% this week as the Treasury yield surpassed 5%. Rates have been steadily climbing for seven straight weeks, the longest consecutive increase since Spring 2022, according to Freddie Mac‘s Primary Mortgage Market Survey.

The average 30-year, fixed-rate mortgage rose to 7.79% as of Oct. 26. That’s up 16 basis points from the previous week and up 71 basis points from 7.08% a year ago, the survey showed.

HousingWire’s Mortgage Rates Center showed Optimal Blue’s average 30-year fixed rate for conventional loans at 7.83% on Thursday, compared to 7.78% the previous week.

“Rates have risen two full percentage points in 2023 alone and, as we head into Halloween, the impacts may scare potential homebuyers,” Sam Khater, Freddie Mac’s chief economist, said in a statement.

“Purchase activity has slowed to a virtual standstill, affordability remains a significant hurdle for many and the only way to address it is lower rates and greater inventory.”

Elevated rates are making a dent in the mortgage volume

As mortgage rates keep climbing, mortgage applications sank to their lowest level since 1995.

According to Bob Broeksmit, president and CEO of the Mortgage Bankers Association (MBA), the lack of inventory and the affordability challenges are the main culprits, steering prospective home shoppers to the sidelines. 

“We expect mortgage volume to decline nearly 30% this year to $1.64 trillion, before an expected 19% rebound in 2024 as rates finally start to trend downward,” Broeksmit said in a statement.

The housing market remains resilient

However, recent home sales readings stressed the resiliency of the housing market as buyers kept shopping despite the challenging environment.

This week, new-home sales and pending-home sales posted month-over-month gains in September. However, Realtor.com Senior Economic Research Analyst Hannah Jones expects home sales activity to hover at a low level until the end of 2023.

The National Association of Realtors (NAR) also forecasts that existing-home sales will drop by 17.5% in 2023, reaching an annualized rate of 4.15 million units sold. 

For mortgage rates to improve, investors will need reassurance that the Fed will pause its contractionary policy at its next meeting next week, Jones said in a statement.

Source: housingwire.com

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With its constant ebbs and flows, real estate demands impeccable timing. There is an intricate art of balancing property transactions, especially in a buyer’s market where there are many opportunities, but with that comes significant risks. Buyers find themselves hesitant, fearing the financial burden of potentially owning two properties, if they can’t sell their current property quickly enough. However, there exists a little-known yet powerful tool: the Sale of Purchaser Property clause, the ace up your sleeve as a buyer in today’s market. 

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This strategic provision offers a safeguard against the dual-ownership dilemma, allowing buyers to seize the advantages of a buyer’s market without being shackled by the burden of holding two properties simultaneously. By understanding and effectively utilizing this clause, savvy buyers can navigate the real estate landscape with peace of mind, capitalizing on current market conditions and a favorable upside when playing the long game. 

The Power of the Sale of Purchaser Property Clause

A Sale of Purchaser Property clause is a condition the buyer agent includes in the purchase and sale agreement when putting an offer on a home. This clause makes the sale of the new property contingent upon the successful sale of the buyer’s current property.

As a buyer, you essentially get to say: “I’ll buy your property, but only if I can sell my current one first.” The deal may fall through if the buyer’s property doesn’t sell within a specified period, making the new property conditional until the other sale has a firm contract in place. If the buyer successfully sells their property during the conditional period, the condition is waived, and the new home is now also considered legally sold with a binding contract. If you’ve exhausted all options trying to sell your property during that time period, the deal on the property is now void, and the buyer gets their deposit back. 

Many buyers and sellers might be more familiar with the terminology of an escape clause; is this any different? An escape clause is included in a purchase agreement so that a seller can continue to market their property and accept new offers from potential buyers even after accepting an offer from a primary buyer. It provides the seller a way to “escape” from the contract if a better offer comes along within a specified time frame. The key difference is that an escape clause primarily benefits the seller. A Sale of Purchaser Property clause benefits the buyer, making their purchase contingent on successfully selling their own property.

Tips for Sellers

Talk to your real estate agent about the escape clause. This allows you to continue to market the property and be aware of further changes in the market (price, interest rates). It’s best to have a short conditional period allowing the buyer to sell their home. 

Tips for Buyers

If the inclusion of this clause still keeps you up at night with the concern of owning two properties, you can always consider selling your home first. Typically, in a seller’s market, it takes many unsuccessful offers before firming up on the right home, sometimes taking weeks or even months. However, you can always take your time and work at a pace that is best for you. Take the time to find the right buyer for your property, and include a longer closing period so you have the time you need to find your next home. 

With many properties sitting on the market and inventory building up, sellers are feeling the pressure and are eagerly waiting for any offer to be presented. Some stand-out properties are still moving quickly, while others are taking much longer to sell, creating circumstances that favour buyers.

Knowing this condition exists, buyers shouldn’t be afraid to make an offer. If you’re on the fence about a property, the SPP clause gives you security that your purchase can only firm up if you sell your current home. Give us a call today to speak to a real estate agent in your area. 

Questions about the real estate market?

Contact us today to talk to a Realtor in your area

Source: zoocasa.com

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Chances are, your mortgage interest probably makes up a large proportion of your monthly expenses.

So, how can you secure the best mortgage rate possible? The potential savings you unlock can have a substantial and lasting impact on your lifestyle and disposable income for many years to come.

Read on as we delve into the world of mortgage interest rates, where we’ll explore their implications, and reveal the keys to securing the most favorable terms.

Verify your home buying eligibility. Start here

In this article (Skip to…)

What is interest?

Merriam-Webster defines interest as “a charge for borrowed money, generally a percentage of the amount borrowed.” You can think of it as the rent you pay to lenders for giving you access to their money.

That makes it different from the money you access. The money you borrow is called the “principal,” and the interest you pay is almost always a percentage of that.

Verify your home buying eligibility. Start here

You pay the interest monthly, but it’s calculated annually. So, if you borrow $100,000 at a 5% interest rate, you’ll pay $5,000 a year in interest, which is $600 a month.

With an installment loan, such as a mortgage, you have to pay the principal back over the life of the loan plus the interest that accumulates.

Nearly all mortgages are “fully amortized.” That means, for a fixed-rate loan, all the monthly payments are the same. But your mortgage lender works them out so you zero your balance (including interest and the principal sum borrowed) when you make the final monthly payment at the end of your home loan’s term, often 30 years.

Amortization and mortgage interest

When you make your first monthly payment on a new mortgage, you owe a huge amount of money. So, almost all that payment goes on interest and your principal debt reduces only a little.

Gradually, over the years, your principal decreases and the interest you owe each month does, too. As each payment is made, the percentage allocated to interest shrinks while the portion allocated to reducing the debt grows larger and larger.

By the time you make your last payment, only a tiny bit is interest and nearly all of it reduces your principal — to zero.

This stuff isn’t easy. So, to discover more, read How mortgage amortization works, and why it matters.

How costly is mortgage interest?

When this was written, in October 2023, mortgage rates had just reached a 20-year high. So, it may feel as if mortgage interest is expensive.

But, of course, mortgages are actually one of the least costly ways of borrowing. The problem isn’t the mortgage interest itself but the large sums home buyers borrow over long periods.

Even a low interest rate can result in high monthly mortgage payments when you’re borrowing big. And your mortgage is likely to be by far your largest loan, at least at the start.

Verify your home buying eligibility. Start here

What’s that in dollars?

So, how much might your mortgage interest cost on a conventional 30-year, fixed-rate mortgage? Let’s try an example. We’re basing it on the average rate for such a loan on the day this was written (7.522%) and on a property at the current median home price ($416,100 in the second quarter of 2023). We’ll assume a 20% down payment.

We fed those numbers into our mortgage calculator. And you can do the same with your own figures. Here’s what we got:

So, that’s $2,333 each month for the mortgage, plus property taxes and homeowners insurance. Did you spot the View Full Report button at the bottom? That provides the real low down:

So, as the Totals section reveals, “By the end of the 30-year mortgage loan term, you would pay $839,722 in total amount ($332,880 would be for the original loan amount and $506,845 in interest).”

Yes, that sounds a lot. But you’re borrowing a considerable loan amount over a long period of time.

It’s actually good value, especially when you think that, at the end, you’re likely to own outright a hugely valuable asset. And you won’t have had to pay rent for the next 30 years to live somewhere else.

By the way, the graph top-right on that page shows amortization in action.

What factors determine the mortgage interest you pay?

There are two main groups of factors that affect the mortgage rates you’ll be quoted: Things you can change and things you can’t.

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The economy and markets

Let’s start with what’s outside your control. That’s mostly the economy and its effect on the bond market for mortgage-backed securities. It’s that market that largely determines current mortgage rates.

Generally, mortgage rates fall when the economy’s in trouble and rise when it’s thriving. Inflation also plays a role, with above-average price rises tending to drive higher interest rates.

Your financial circumstances

Now, for some things you can control. Lending is all about risk. Lenders know that some of their home loans will turn bad. But which?

So, they analyze your personal finances to discover how much of a risk you pose. And the bigger that perceived risk, the higher the interest rate they’ll quote you. Of course, if they think there’s a serious danger of your mortgage loan turning bad, they’ll simply decline your application.

So, what specifically do they look for? It’s mainly:

  1. A consistent and adequate source of income — That’s often easy to prove if you’re an employee. But it can be harder for the self-employed and those in the gig economy
  2. A history of managing debt well — That’s your credit score and credit report
  3. A manageable level of existing debts — How easily will you afford the new monthly mortgage payments once you’ve met all your other inescapable financial commitments each month? This is called your debt-to-income ratio or DTI
  4. The down payment amount — The bigger your down payment, the more skin you have in the game. And that means you’re less of a risk. So a high down payment helps get you a lower interest rate. However, most borrowers can easily get a mortgage with just 3% or 3.5% (zero for some) down. This is your loan-to-value ratio (LTV)

Each of those normally affects a lender’s calculations when deciding what mortgage interest rate to quote you. And, of course, you have a great deal of control over them.

For example, spending time before you apply, building your credit score and reducing your debt (especially card balances) can earn you an appreciably lower interest rate.

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Rate shopping

How would you like to save more than $1,000 a year for many years to come for just a few hours’ work?

It’s easy. And yet, a surprising number of mortgage borrowers pass on the opportunity.

In May 2023, federal regulator the Consumer Financial Protection Bureau (CFPB) released a report under the headline:

Mortgage data shows that borrowers could save $100 a month (or more) by choosing cheaper lenders

The CFPB found the spread among different lenders’ mortgage interest rates is “often around 50 basis points of the annual percentage rate.” Fifty basis points is 0.5%. So, it could be the difference between paying a rate of 7% or 6.5%. Try running those figures through our mortgage calculator!

The report also says that such differences apply in “virtually every segment of the mortgage housing market, including loans backed by Fannie Mae and Freddie Mac, Federal Housing Administration loans, U.S. Department of Veterans Affairs (Veterans Affairs) loans, as well as jumbo loans.”

And all you have to do to unlock such potential savings is request quotes from multiple lenders. Of course, your preferred lender may come up with the best deal. But suppose it doesn’t.

Fixed vs. adjustable-rate mortgage

Most Americans, especially first-time home buyers, opt for a fixed-rate mortgage (FRM). They’re prepared to pay a little more for the security of knowing that every monthly payment they make on their loan will be the same as the last one.

A fully amortized FRM is as predictable as anything gets. You pay the same $x each month until you finish paying down the loan — or sell the home or refinance the mortgage.

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Adjustable-rate mortgages (ARMs) are very different. Or they can be after a few years.

An ARM almost always starts with a lower interest rate than an FRM. And that rate is fixed for an initial period, after which it can float in line with general interest rates, usually once each year.

So, a 5/1 ARM has a fixed rate for the first five years, a 7/1 ARM’s rate is fixed for seven years, and so on. The second numeral tells you how often the rate can be adjusted after the initial fixed-rate period expires. That numeral is most often a 1, meaning the rate can then float up or down annually (once a year).

That’s fine as long as mortgage rates remain low. But it can cause real pain when those interest rates shoot up, as they have done in recent years.

Luckily, that pain is usually moderated because most ARMs come with caps that limit how much their interest rates can rise. But even moderated pain is still pain.

Some home buyers can still be better off with ARMs. If you know you’ll be moving home within seven years and choose a loan type such as the 7/1 ARM, your mortgage interest rate will be fixed for as long as needed.

The bottom line on mortgage interest

At worst, mortgage interest is often seen as a practical necessity. The other option is to spend a lifetime paying rent, ultimately without the prospect of building valuable assets.

When mortgage rates are high, the weight of interest payments can become a substantial concern. But, if mortgage rates fall one day, refinancing is always an option, provided you remain creditworthy.

And there are things you can do to pay as low a mortgage interest rate as possible. Comparison shopping among several lenders could save you $100+ a month. Meanwhile, improving your credit score and reducing your existing debts can make another big difference.

Homeownership remains as much a part of the American dream as it always has. If you’re ready to fulfill your dream, don’t delay.

Time to make a move? Let us find the right mortgage for you

Source: themortgagereports.com