Weekly Rate & Market Update 6-17-16
It’s that time of year, our 5th Annual Flag Collection and Retirement will take place on Friday July1st!
Question of the week: We are thinking about putting in solar panels and a contractor is pressuring us to use the HERO program, what do you think?
Answer: I think putting in solar panels could be a really good idea. If you do I suggest purchasing the solar system instead of leasing, as I have discussed here.
One way of financing the solar system is to use the HERO program (Home Energy Renovation Opportunity) offered to home owners who wish to make energy efficient renovations to their home. The HERO program is a financing program but instead of paying a lender for the loan you make payments through your property taxes. The amount financed is placed as a lien on your property and when you receive your annual tax bill there is a line item for HERO to include principal and interest payments.
If you and your contractor meet the criteria you could be eligible for financing through the HERO program and funding is provided through local municipal entity by private sources who manage the program.
Sounds easy, and it appears that it is pretty easy. Get your renovation approved, get your money, make your payment twice a year when you pay your property taxes.
But is it a good way to finance your energy efficient renovations? Perhaps.
Some major factors to consider before using HERO are cost and the lien.
There is a 4.99% fee added to your assessment for administrative costs (so if your financing $20,000 for solar system your assessment becomes $20,998. Currently the rate on the program has an APR of 7.99%. You may choose an amortization period of 5, 10, 15 or 20 years.
Because the financing lien is part of your property taxes and not a trust deed against the property, like your mortgage, it presents different options—or problems—when it comes time to sell or refinance the property. You and your buyer may agree for the buyer to assume the balance of the HERO assessment, or you may need to pay it off as part of the sale. If refinancing the lender will include the payment as part of qualifying and also ensure the lien will not be called due sooner than in the agreement.
Before signing up for the HERO program to finance home improvements or renovation check with other financing sources, such as an equity line from your bank or credit union, or if depending on your current mortgage rate perhaps we can help with a new mortgage.
The HERO program has some positives but it is expensive and could be cumbersome to obtain depending on the application and approval process with your local HERO provider.
Here is website with more information on HERO
Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.
We are borrowing more. That is the news from the Federal Reserve which released data on first quarter household debt in the U.S. Total household debt on April 1st was 1.1% higher than it was at the end of the fourth quarter and totaled $12.25 trillion (point of reference, U.S. Treasury debt is currently $19.29 trillion, California’s debt is $430 billion). Mortgages and home equity lines of credit about 72% of the debt total. The balance is primarily student loans (11%), auto loans (9%) and credit cards (6%). The news is somewhat negative for mortgage rates as it shows a growing demand for household debt, which spurs real estate sales, which boosts the economy and strong economic growth leads to higher rates.
Plenty of data this week for fellow econ geeks like myself. Retail sales for May had some good growth, up 0.5% from April, following April’s very strong 1.3% increase. Since consumer spending is 65-70% of our economy strong retail sales can push rates higher.
How much is being paid for goods and services? Data released this week indicates prices are rising for wholesalers, with the Producer Price Index up 0.4% in May, and consumers, with Consumer Prices up 0.2%. The news is somewhat good, but the year over year CPI increase of only 1% is positive for low rates as it signifies relatively stagnant prices, and is well below the Federal Reserve target inflation rate of 2%.
Speaking of the Fed….Wednesday was Fed day as it open market committee meeting finished up with the result being no change by the Fed for its key interest rate. The Fed may have held steady to its discount rate but did not hold steady to its economic outlook. Indicating that it anticipated two more rate hikes this year, the announcement indicated rate increases would be slower in the future as economic and price increases are expected to be less than 2% looking forward. This is positive news for mortgage rates.
Rates for Friday June 17, 2016: Rates held firm this week from last, we are now three weeks into matching our lowest rates of the past several years. Take advantage of these rates! If your rate is 4% or higher contact me to see if we can lower your rate, payments or term of your mortgage.
FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.375% Flat
30 year high-balance conforming 3.50% Flat
30 year FHA 3.25% *** Flat
30 year FHA high-balance 3.25% *** Flat
Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages. ***FHA rates have no points and credit towards closing costs, recent rate change reduces credits
We are officially a Long Beach Poly only house as our 8th grader completed middle school yesterday and is looking forward to joining her sister next year at the home of the Jackrabbits. Summer stretches endlessly before them this morning, to celebrate we will be hosting a dozen or more new freshman this afternoon and evening for pool and barbecue party…presume it may be a bit quieter at your home!
Have a great week,
Dennis
