You, too, could own a McMansion thanks to the low jumbo fares – Orange County Register
What is stopping you?
Maybe you too can afford a Southern California McMansion. How about paying only the interest, not the principal, at a mortgage rate of 1.875% at its lowest for the first three years?
For a $ 1.5 million loan on a $ 2 million house, your house payment is stuck at $ 2,344. Assuming monthly property taxes of $ 2,083 (1.25% annual property tax rate) and $ 250 for monthly home insurance, your total home payment is $ 4,677.
It would cost you about $ 6,000 a month to rent a $ 2 million house in Southern California, said Lance Siegel, president of Lake Forest-based HVCC Appraisal Ordering.
Yes, you need good credit. You must have qualifying income, shell out $ 500,000 for a down payment and more than $ 30,000 in settlement fees. And make sure you have Plan B ready in three years when your mortgage amortization schedule kicks in and your principal, interest, tax and insurance payments rise to nearly $ 9,300 per month. month.
But the financing costs are ridiculously low to begin with.
If the uncertainty of rates and payments is causing you too much heartburn, you can find longer interest freeze terms of five, seven, or 10 years in the 2% to 3 interest rate range. % on 30-year mortgages.
Even the 30-year jumbo fixed rates are super cheap. I have found rates as low as 2.375% for Inland Empire properties, where jumbos start at $ 548,250. In Los Angeles and Orange counties, where jumbos start at $ 822,375, rates are as low as 2.625%.
What’s going on with all that easy rate mortgage money?
It is as if the water is at its lowest level. There is so much private capital out there looking for a place to park and earn some type of return.
The three-year interest-only program is particularly cheap now, as people invest in mortgages to hedge against a possible spike in inflation, in hopes that short-term rates will rise over the next few years. .
Investors are getting something now and some long-term protection as well, as variable rate mortgages are recalculated against the Guaranteed Overnight Funding Rate, or SOFR, the common benchmark that replaced the corrupt index of the London Interbank Rate, or LIBOR.
For the start-up rate of 1.875%, the 30-day average SOFR is 0.50. The profit margin added to the index is 2.75%. If nothing changes during the three-year introductory period, the mortgage interest rate would climb to 3.25%.
Assuming no principal was added, the total payout on that $ 2 million McMansion would almost double to $ 9,293 per month. That’s the “amortized” payment of $ 1.5 million over the remaining 27 years at 3.25%, plus taxes and insurance.
Rents continue to climb. More and more, I am getting complaints from readers and clients that there are no reasonable rental properties – let alone great deals.
If you buy now instead of renting, you could look like a genius in three years time as home prices continue to soar. And you could enjoy big capital gain with cheap and easy money. Or, if the real estate boom turns into a collapse, you might just regret such a ploy.
It’s a tough call. But one thing is certain: cheap, almost free money would be guaranteed for the next three years.
Freddie Mac Rate News: The 30-year fixed rate averaged 2.86%, 2 basis points lower than last week. The 15-year fixed rate averaged 2.12%, down 7 basis points from last week.
The Mortgage Bankers Association reported that the volume of mortgage applications was unchanged from the previous week.
At the end of the line : Assuming a borrower gets the 30-year average fixed rate on a compliant loan of $ 548,250, last year’s payment was $ 3 more than the $ 2,270 payment this week.
What I see: Locally, well-qualified borrowers can get the following fixed rate mortgages with a cost of 1 point: a 30-year FHA at 2.125%, a 15-year conventional at 1.875%, a 30-year conventional at 2.5% , a 15- one-year conventional high balance ($ 548,251 to $ 822,375) at 1.99%, a 30-year conventional high balance at 2.69% and a 30-year fixed jumbo at 2.625%.
Eye-catcher loan of the week: A 15-year fixed rate at 2.375% free of charge.
Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or [email protected] Its website is www.mortgagegrader.com.