A Simpler View on Bonds, Mortgage Rates, and The Fed

Following on to yesterday’s article about changes in bond yields, mortgage interest rates, and the likely future of Fed decisions, it’s worth taking a look at this article by Consumer Affairs. It does two things well. First, it summarizes recent trends in mortgage interest rates for a variety of different types of loans; second, it provides slightly less technical insight into the direction that these changes are likely to take things. Of course, we don’t believe Consumer Affairs is better at predicting the future than anyone else, but it’s still worth exploring.

Mortgages, Bonds, and The Fed

With bonds selling off, it’s possible that the Fed could ease off their plan to increase interest rates this summer. If the 10-year treasury yield goes over 2.75% anytime soon, and the Feds continue to hint at tightening monetary policy, then a repeat of the 2013 hit to the housing market could be in store. Of course, while the Fed generally does a good job of telegraphing their moves, the bond market does not. And everyone knows that market timing is a fool’s game. Interest rates may be higher than they’ve been over the last year, but they’re still historically low. Waiting may be a risky bet.

Weekend DIY for The Summer

It’s hard to believe, but Spring is almost over — just two more weeks (well, to be honest, given the weather, it kind of feels like Summer is almost here). And while summer weekends are perfect for BBQ and swimming, let’s be honest, you want to get some work done around the house, too. Thankfully, we have that old stalwart, This Old House, which has provided a handy list of 28 projects that can get done over the course of a weekend. And with 28 to chose from, you’re sure to find a few that will meet your tastes and needs. 

Picking The Right Remodels

Whether you do it yourself or contract it out isn’t going to make a whole lot of difference if you start down a road of remodeling, which is going to cost you more than it’s worth. So far this year, the average return on investment for remodeling projects is 63%. That’s right, the average project is worth 37% less in home value than the cost of doing the project in the first place. You can get some good advice on picking projects which pay for themselves in this article. But of course, end value isn’t the only reason to do a remodel, and if something is appealing to you, you shouldn’t necessarily avoid it just because the cash ROI isn’t as high as it might be for other projects.

Have You Been Saving Your Receipts?

This blog has been looking at home improvement from a few different angles recently, but there’s one that can stand to get a little more depth: taxes. As the market continues its recovery from the 2008 crash, many people are once again in a position where their homes are net assets. The good part of being a net asset is that when you sell the home, you’ll have made a profit — the bad part is that you have to pay taxes on those profits. This New York Times article goes into greater depth, but the upshot is this: save all your home repair and improvement receipts … forever.

Now Might Be The Time to Refinance

Although the news on the mortgage front in the U.S. press has all been fairly rosy so far this year, this article from The Australian paints a slightly different picture of the U.S. market. It makes the valid point that a lot of people who took out interest-only loans before the crash are now reaching the end of the interest-only period — and many of them are starting to fall behind on payments. If you’re not yet in that boat, but are coming up to the end of your HELOC period, then given the current, really good rates, now might be the time to look into refinancing, before you get into trouble.

Watch Those White Lies!

You may not think it’s that big of a deal — and because both downpayment requirements and interest rates tend to be lower, it can be really tempting — but lying on your mortgage application, even little white lies, is not a good idea. Most often attempted during cash-out refinance, 19% of all mortgage representations to Fannie Mae in 2013 were “occupancy fraud”. That’s where the borrower states that he intends the property as his primary residence, but actually intends for it to be a rental or vacation property. Not only is this very costly to lenders, but Big Brother is watching. Both Lexus-Nexus and, more significantly, the Treasury Department’s Financial Crimes Enforcement Network keep tabs on such things.

3 You Can Definitely Do on Your Own

Following up on the recent blog post about DIY vs. DIFM, it’s important to recognize which projects are hard (definitely DIFM), and which are pretty easy (when you should really consider saving some money by DIY). Here are some handy tips from The Hamilton Spectator on three projects that may sound harder than they are: unclogging a garbage disposal, tiling a backsplash, and installing a new toilet. To be sure, these are not trivial — but they’re also not so hard that you really need to get a professional. Give it a try, you may be pleasantly surprised!

11 Steps to Navigate Refinancing Your Home

With interest rates near record lows, and many people sitting on loans with fixed rates over 5%, this guide by U.S. News & World Report couldn’t be more timely. Of course, refinancing only makes sense if it will actually save you money. You need to take many things into account, from how much of your loan remains, to closing costs on the new loan, to the time-value of money for money now vs. money over the life of the loan. There are lots of comparison calculators out there, but a calculator alone won’t get the job done. This report gives 11 concrete steps you can follow to navigate the refinance process.

Watching The News Can Give You Whiplash

Normally, this blog provides you with a consolidated view into all things home related. On a daily basis, there’s usually something interesting to report. But sometimes, the news itself is the news. If you google “mortgage” and click on the news tab, then in today’s top stories you’ll see that “mortgage rates slipped lower last week” and “mortgage applications plunge on higher rates”. It’s exactly this kind of conflicting news that can drive someone mad. In times like this, the extreme fluctuations in reporting remind one that mortgages are a market, not unlike the stock market. And just like the stock market, trying to time things can be a mistake. Sure, if you wait for the next Fed announcement, whether you’re a buyer or a seller, things might improve. But they also might go the other way. If you guess right, you’ll certainly congratulate yourself. But if you guess wrong, how much worse is that going to be?