Fed Rates Keep Falling

Fed Rates Keep Falling on My Head:
What the Fed Rate Cuts Mean for Your Savings and Mortgage

CALABASAS, CALIFORNIA – Today, the Fed slashed the Fed funds rate by 50 basis points.  Like most things, dropping rates are a game of give and take; the lowering of Fed rates can be beneficial for some parts of your financial life and detrimental for others.  So how exactly can you make the most of the most recent Fed rate cuts?

What does the Fed rate cut mean for my mortgage?
Not all mortgages are directly linked to the Fed rate, but adjustable rate mortgages (ARMs) are one type that is influenced by the Fed rate.  Thus, ARM rates were affected by last week’s drastic Fed rate drop.  In fact, just within the past week since the last Fed cut, the APR on a 5/1 ARM dropped from 5.65% to 5.25% based on Informa’s National Averages (Source: Interest Rate Review®, Informa Research Services).  Read more

Fed Cuts Mortgage Rates Again

The Fed Cuts Rates Again: What You Should Do Now?
Today, the Fed decided to cut the Federal funds rate a whopping 75 basis points to a scant 3.5 percent, the lowest its been since August 2005 (Source: federalreserve.gov).  Although talks in the news and among policymakers have been centered around countering a potential recession, the unabashedly selfish (nonetheless, important) question for you may be “What does this mean for me?”  Here’s a quick cheat sheet for managing your finances after the Fed’s decision:

Loans

• The effects of the Fed funds rate cut should be seen most noticeably in short-term adjustable rate mortgages (ARMs).  While a drop in rates will be more evident over the next few months, those who will benefit most immediately will be those with ARMs whose introductory fixed rate period is ending.  Because the rate adjustment period is beginning on these loans, the rate cut will be reflected in the newly assessed rate.  However, those with ARMs who are in their introductory fixed rate period could potentially see the benefits of the lowered rates over time. Read more

Down Payment Options - What is My Best Bet?

Everyone knows that the standard is to put 20% down when purchasing real estate.  But is this my best bet?  In making this choice, do the math and ask yourself the following 3 questions:

1.  How long do I plan on living in the home?
Depending on how long you intend on living in the house, you may or may not choose to make a substantial down payment.  If you plan on staying in the home for a longer period of time, you may want to look into making a larger down payment if possible.  However, because you don’t get your down payment back, you may want to think about putting less money down if your plans are still up in the air.

Also, figuring out whether you plan on staying in your home for 3 years or 30 years will help you decide what kind of loan you should get.  For instance, if you plan on staying in your home for a shorter period of time, you may consider looking for an adjustable rate or interest only mortgage loan. Read more