Old World Charm, Modern Living: Nob HIll Condo
Beautiful, renovated Victorian condo!
Garage parking! Top floor!
Walking distance to everything!
Fun neighborhood!
An article in this morning’s San Francisco Chronicle’s Business section builds off of a Merrill Lynch economist’s view that homeowners who choose fixed-rate mortgages over adjustable-rate mortgages might regret their decisions. The economist, Sheryl King, contends that borrowers are piling into fixed-rate mortgages at precisely the wrong time, just before the Fed will start cutting interest rates. This behavior is similar to the way investors tend to buy stocks at the peak of the market.
The economists predict that the economy will weaken and the Fed will start cutting interest rates early next year. By the end of 2007 adjustable rate mortgages will be significantly cheaper.
This article caught my attention because it runs counter to everything else that I have heard in the media over recent months about rates going up and about the number of homeowners in the Bay Area who will be burned and unable to afford their interest-only adjustable rate mortgages and the impending doom and gloom to come.
Interesting. And refreshing. I guess my client base is different than the norm, but I think I have only had two buyers choose interest only loans (which, by the way, all require principle payments after year 5). Both were situations where one buyer was not working, but expected to be back at work shortly. This loan vehicle enabled them to buy more home at a time that was suitable for them in their lives.
Will rates go down? Maybe. Will rates go up? Maybe. Should a buyer (or homeowner) get a fixed-rate loan? Maybe. Depends on what the product is and how it suits their overall financial picture. Should a buyer (or homeowner) get an adjustable-rate loan? Maybe. It depends. My conclusion: one size does not fit all. The most important thing–do your homework, get good advice from other financial advisors (your accountant, financial planner, etc.), work with a reputable mortgage broker or lender that you trust and choose the loan product that is best for you!
[By the way, earlier this year, I refinanced into an interesting loan product. It has a rate that varies based on the 1-month LIBOR which has gone up each month since I re-financed. I am very happy with the loan, despite the rate increase]
