If you were looking to buy property or refinance a property this week, you’re timing couldn’t be better!
Even though London is an ocean away, here in the U.S. we’re feeling the after-shock of the UK’s decision to “brexit” – or exit the European Union.
The decision has been devastating to European banks and stocks, but it is driving lots of banking activity here in the U.S.
When the UK decided to “brexit”, fearful investors flocked once again to U.S. Treasuries. Demand drove yields on the 10-Year down to record lows. The yield is at 1.36% as I speak. If you were thinking of seeking safety in U.S. Treasuries, maybe think again…that’s a pretty pathetic return.
When there’s lots of demand for the 10-Year Treasury, prices increase and yields decrease.
The 10-Year yield is loosely tied to mortgage rates because investors who like the 10-Year also like Mortgage Back Securities. High demand also drives mortgage rates down, which is exactly what happened.
As a result, mortgage rates hit all time lows again this week, which naturally fueled strong demand for mortgages. Applications for mortgages surged 14% this week from the previous week, according to the Mortgage Bankers Association (MBA). Applications for mortgages are now 66% higher than one year ago.
The number of people who want to refinance their home loans jumped 21%, which is 113.5% higher than one year ago, when rates were about 3/4 of a percentage point higher.
A big difference this year is a drop in rates for larger, jumbo loans (loans over $417,000), and that’s getting a lot of activity. Many of these refinances are cash-out, as borrowers take advantage of higher home values and more equity.
There was a small boost in mortgage applications for purchases. Purchase volume rose 4% for the week and was 23% higher than last year at this time.
The average rate for 30-year fixed-rate mortgages with conforming loans ($417,000 or less) decreased to its lowest level since May 2013, to 3.66%.
The average rate for 30-year fixed jumbo loans (greater than $417,000) decreased to its lowest level since January 2011, to 3.67%.
Some lenders were even quoting 3.25% on the 30-year fixed for high quality borrowers, according to Mortgage News Daily.
For investors, when rates are this low, you can dramatically increase your cash flow through refinancing. And if you’re purchasing, deals are going to look even sweeter this week.
If you’re new to the real estate loan business, it’s important to know you can lock in today’s rate for 30 days. If you think you might buy or refinance, talk to a lender today. There is no fee to apply, usually.
If you’ve paid cash for some homes, you may want to consider refinancing and taking cash out – now that borrowing money is so cheap. This could potentially allow you to buy more homes which could substantially increase your cash flow.
Two homes financed with today’s low interest rates can increase your cash flow by 5% or even more than a home you own free and clear.
If you can’t qualify for a loan today, don’t give up. If you have bad credit, you can hire a credit repair company. If you have high debt, start paying it down as banks look at debt to income ratios. Talk to a lender now to find out what you need to do to get qualified. You might be surprised that you can!
And if that doesn’t work, well…maybe you could talk to a Chinese lender.
Reportedly, some Chinese university students have been able to get loans with a different kind of collateral than real estate. They are using nude pictures as IOUs on some online lending platforms.
But just sending a naked photo isn’t enough. Borrowers have to be holding their ID card in that photo. They also have to report their family information, including addresses and cell phone numbers.
According to the Nandu Daily, a student can get up to 15,000 yuan ($2,277) credit once a clear photo of a naked borrower holding his or her ID card is uploaded to the lenders.
The credit varies based on the borrower’s education level. Usually an undergraduate student can receive 15,000 yuan in credit, while those studying at more famous universities can receive even larger loans.
Here’s the catch:
If you don’t pay it back in the agreed upon time frame – usually 36 months – mom and dad will be contacted. And that would be the ultimate shame.
And that’s tough to do because interest rates are high – as high as 30% – and well, these are students.
What comes with the seemingly easy business transaction is a costly overdue repayment. But now that the word is out, several online lending platforms that secretly offer this unusual form of IOU have stated they no longer offer this option, according to the Nandu Daily.
This method wouldn’t work here in the U.S. Students here send naked photos for free.