From the desk of Rand L Miller, July 13, 2006 Mid Summer Market UpdateI thought that you might like an update on Real Estate/Finance News. The average 30-year fixed mortgage rate fell from 6.79% to 6.74% over the seven-day period ended July 13, the first time in five weeks the rate has declined Although the rates are still at their highest level since 2002. Currently Prime is at 8.25%. A research company claims that they expect prime to inrease to 8.75% by Oct 06. I just noticed that the last time Prime was in this 8% range was Mar 2001 when it dropped below 8.3%. Look at the below chart fixed rates on top and Prime the bottom, look at the curve on Prime and the rollercoaster ride on the 30 year fixed. It sure has been a nice long low period on the fixed rates..
Insider Arguments on ARMSBack in 1991 when I worked as an area manager for a bank, in the mortgage dept, the VP always used to get on my back about not selling enough ARM's [Adjustable Mortgages]. My pipeline was mostly fixed rates. I always said that after explaining the pros and cons of ARMs to my clients they just always chose the fixed rates. After a while the VP started to get pushy and told me to use my salesmanship to push the pros of the arms and gloss over the cons. Weeks later my pipeline was still packed full of fixed rates. Now some of you are probably thinking I was just a stubborn employee. But what would you do? You see Banks and big mortgage companies have quotas they need to sell you what helps their bottom line, what put's money in their shareholders pockets. It boils down to what's best for them, and not what is best for you. With the ARMs they never loose, because if the rate goes up they always have a margin of earnings over the indexed rate [their cost]. But with fixed rates they are stuck for 5, 7, or 30 years at the fixed rate. Since money has a cost and if they are paying 6.75% on it but their clients are enjoying 5.75%, you see the picture LOSS. Banks don't like to loose. But if they have customers on ARM's at 6.75% their cost of money is probably only 5.75% so they are earning 1% every month. If the rate goes up to 8% then they still have the 1% profit. The only time they loose on an ARM is if the rate surpasses the Max Rate [Life Cap], usually 12%, but they are betting that the rate won't exceed the Life Cap. Even though I attended the Bank's "ARM Sales School" I still was determined to share the unbiased pro and con details of the ARMs. This ended my career at the bank, thus started Atlantic Security Financial. But I have heard from so many new clients who are wanting to convert to fixed rates. Many of which are surprised that their 1.25% ARM is increasing their balance by 10,000 to $20,000 over these past couple years. They say they were never told that this would happen. So what happened? Unfortunately they were helped by some mortgage salesperson who was well trained at "ARM Sales School". Most option arms have the ability to increase your loan balance by 110% to 115%. So what should they do? Unfortunately, if they don't want to see their balance continue to increase or their payment increase beyond their reach, now might be a good time to refinance. I realize that ARMs can be very helpful, and I recommend them in certain situations, but, I always explain the good, bad and the ugly details. Yes nice low payment, but the rate can adjust monthly with their balance increasing exponentially if you pay the minimum payment. A little long winded, just had to get that off my chest. If you want a candid and honest evaluation of your mortgage situation, give me a call or email me. You will get the straight scoop. Remember we fund good credit loans, our rates can usually match or beat the best the market offers. We also provide bad credit loans even if your scores are in the 400's. Stated Income and No Income or Asset Doc loans. EZ Equity Lines to 100%, and yes Option Arms to 1.5million. Commercial loans and rehab loans. Call me for details.
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