Ways to lower your insurance premiums

Question:

With all the turmoil in the banking industry this year, will it now become harder to get a mortgage?

Answer: e turmoil created by the failure of the Silicon Valley Bank and the Signature Bank has raised questions regarding the financial system and potential harm to depositors and borrowers. e URL is: https://edie.fdic.gov/ e government is likely to step in and fully protect depositors if other banks fail. As Treasury Secretary Janet Yellen explained in March, “similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.” e financial system has generally done well. FDIC-insured institutions had a net income of $68.4 billion in the fourth quarter, almost a record amount. ere are roughly 4,700 FDIC member institutions and most seem to be sensibly operated. But, yes, the mortgage marketplace will feel a backlash from the bank failures.

At this writing, at least, the results are mixed. We have two banks that failed. If you are a depositor, then you at least qualify for FDIC insurance coverage.

According to the FDIC, “the standard deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.” You can check your coverage by going to the FDIC’s Electronic Deposit Insurance Estimator (EDIE).

If you have deposits not covered by the FDIC, then your money at these two institutions will be fully insured under the Federal Reserve’s newly created Bank Term Funding Program (BTFP).

So far, so good. Despite scary headlines, all depositor money is available. ere have been no bank runs. e big question is what happens next. Will there be other bank failures? If so, will the system continue to protect borrowers, and how does this impact mortgage borrowers?

First, mortgage lending has not been a great business of late. e pandemic and rising interest rates have raised costs and reduced loan origination volume. In the fourth quarter, according to the Mortgage Bankers Association, the typical loan produced a $2,812 loss.

Lenders are cautious because of operating results and now with the Fed’s .25% rate increase in March they have still another reason to be careful.

As Federal Reserve Jerome Powell said, we are likely to see “tighter credit conditions for households and

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By Peter G. Miller

businesses, which would in turn affect economic outcomes.” ird, if you own real estate and financed or refinanced when rates were in the 3 percent range or even lower, your housing costs might go up with a new home and a new mortgage. e result is that many people who might have moved are staying put, a reality that keeps supply down and home prices high.

Translation: Getting a mortgage is likely to be tougher in the coming year – tougher, but not impossible. Borrowers with good credit, solid savings and little debt will do best.

Second, while the Federal Reserve does not control mortgage rates, its effort to slow inflation by raising interest costs has made new mortgages less affordable. Weekly rates went from 3.22 percent at the start of 2022 to 6.6 percent in mid-March 2023, according to Freddie Mac. If you borrowed $300,000 over 30 years, the monthly cost for principal and interest went from $1,301 to $1,916. Affordability issues are forcing many potential home buyers from the market.

Email your real estate questions to Mr. Miller at peter@ctwfeatures.com.

By Marilyn Kennedy Melia

Today’s buyers may love their home but hate their mortgage.

In the foreseeable future, rates may very well stay higher than the 3 to 4 percent loans that made home buying more affordable through much of 2020 to 2022, notes Doug Duncan, chief economist at mortgage agency Fannie Mae.

But rates may dip enough to make it advantageous for recent buyers to refinance that six-seven percent rate, say Duncan. He predicts just a one percent drop for owners’ current rate “will trigger significant refinancing.” Moreover, once the Federal Reserve inflation is under control, rates could likely settle in the 4.5 to 6 percent range.

To entice home buyers to borrow from them, some lending firms have begun advertising “no cost” refinance later on.

Right Time?

Should rates begin to fall, when should a homeowner pull the trigger – or should they wait for further declines?

No one knows exactly where rates will be next week, next month or beyond.

And, the rate a particular borrower is offered depends on his financial profile, with those with high credit scores or a large income relative to his mortgage payment and other debts earning the most competitive rates. Whether it’s worthwhile to refinance depends on your own instinct on when to jump in, informed by your monthly costs.

Cost/Savings Calculation

First, a homeowner needs a high degree of certainty that he won’t be moving soon. en, calculating the monthly savings from a lower mortgage rate to meet the costs of refinancing. For instance, if it costs $3000 to refinance, and the new loan saves $150 monthly, it will take 30 months for refinancing charges to be recouped.

However, refinancing can sometimes be counter-productive to your overall financial health, like when a borrower refinances into a bigger loan to receive “cash back,” notes Nadine Burns, CEO of A New Path Financial. And, look to see if a rate drop allows you to refinance into a shorter-term loan, swapping a thirty -year mortgage for a fifteen year, so that you can be mortgage-free earlier.

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Call/text: 360-333-4048 jenneddleman@ windermere.com