Bill Rapp here with the Heartfelt and Hot in Houston Blog, and this is our newest segment: Mortgage Rates Pummeled By Regulatory Drama!

At face value, the bonds that underlie the mortgage market didn’t sustain too much damage today.  If there was nothing else to inspire lender rate changes, we might not be too much worse vs yesterday.  Unfortunately, there is an absolutely massive source of motivation that unexpectedly burst on the scene last night.  If you’re not already up to speed on it, READ THIS. Mortgage Rates Pummeled By Regulatory Drama!

As far as today is concerned, rates got torched.  This is no surprise.  Regulators just instantly doubled the fees they charge to provide guarantees for the mortgage market.  Lenders will be forced to pay those fees on all loans that are already locked.  Consumers will foot the bill for everything else.

Strikingly, the pull-back from lenders is much bigger than the 0.5 points imposed by the GSEs because of the way the announcement was rolled out.  Mortgage lenders don’t like surprises, and they don’t like suddenly being forced to pay hundreds of millions of dollars they hadn’t budgeted for.  When that happens, they are going to raise rates to offset the newfound losses.  And that’s exactly what they did.

The average lender is quoting a conventional 30yr fixed rate that’s 0.25% higher today than it was yesterday morning.  Ironically, this applies to both refis and purchases, even though the regulatory change only applied to refis.  Why is that?  The move by regulators was so abrupt that not every lender was able to implement it as a refi-specific upfront fee today.  Instead, lenders simply raised costs across the board with the intent of sorting things out tomorrow (hopefully).  Theoretically that means rates on purchases should come down relative to refis for those lenders, but we nonetheless expect the whole ordeal to have created lasting damage to mortgage rates well in excess of the 0.5 points regulators intended.  Had they gone about this in a more even-keeled manner, and given the industry time to adjust, consumers wouldn’t be paying nearly as high of a price.

So is 0.5 points a big deal in the bigger picture?  Yes and no.  It’s 20 bucks a month on an average loan of roughly $300k.  But again, it’s much more than 0.5pts today.  Most borrowers are seeing a $40/month difference.

Even then, examining financial impact in terms of monthly payment is an old car dealer trick to get you to care less about generating more profit for the dealer.  Let’s talk about it in terms of its present value.  We can do that.  After all, I got the $20/month thing by looking at the difference in monthly payments created by paying an extra 0.5 points upfront.  In fact, you can opt to pay the 0.5 points upfront and not be penalized with a higher rate.  0.5 points upfront on a $300k loan is $1500.  Is it a big deal if someone unexpectedly takes $1500 out of your pocket?  And remember, the whole industry just recoiled in defensively priced fear such that the fee is at least equal to 1.0 point (aka $3000 out of your pocket).

Bottom line: don’t let anyone tell you this isn’t a big deal or that it doesn’t matter or that it’s a drop in the bucket in the bigger picture.  All of that could be true to someone on the outside looking in.  But if you had a loan in process that wasn’t locked or if you are in a position to save money by refinancing and just haven’t gotten around to it yet, the government just vacuumed $3000 out of your purse/wallet.  In a perfect world, that $3000 will slowly shrink back down to $1500, but as it stands right now, it will never be any less than $1500.

In the government’s defense, they could absolutely need that $1500 in order to defend the sound functioning of the mortgage market.  If that’s truly the case, then there was a far calmer and more gradual way to go about this–one that wouldn’t have forced consumers to pay more than twice as much as intended and one that wouldn’t have inadvertently hit the purchase market as well.

Bottom line for consumers reading this: yes, your mortgage quote just got way more expensive today if it wasn’t locked by Wednesday afternoon.  It has nothing to do with your lender and there’s nothing your lender can do about it.  Your options will likely be to opt for a rate that’s .125-0.25 higher than what you were planning on or to simply pay higher costs  upfront.  The third option carries some risk, but also some potential reward, and that would be to wait to see if things calm down in the coming days.  There’s also a very low chance that this decision could be retracted and re-implemented with a healthier delay, but I wouldn’t count those chickens. Mortgage Rates Pummeled By Regulatory Drama!

The inspiration for today’s edition came from this original article:

If you are seriously considering moving right now you need to take action right now and talk to a reputable Real Estate & Mortgage Broker today, please call 281-222-0433 or visit:

Bill Rapp here with the Heartfelt and Hot in Houston Blog, and this is our newest segment: Realtors raise their forecast for 2020!

Pending home sales continued to climb in June, rising 16.6% monthly since May, and increasing 6.3% since June 2019, according to the National Association of Realtors. This beats the expectation for the monthly gain, which was a rise of 12.5%. It’s the second straight month of increases in contract activity. Realtors raise their forecast for 2020!

The Realtors have also raised their forecast for the housing market because of what they say is an apparent market turnaround. For 2020, existing home sales are expected to decline by only 3%. New home sales are projected to rise by 3%.

The previous forecast for existing home sales in 2020 was down 7.7%, with new home sales up 1%.

“It is quite surprising and remarkable that, in the midst of a global pandemic, contract activity for home purchases is higher compared to one year ago,” said Lawrence Yun, NAR’s chief economist. “Consumers are taking advantage of record-low mortgage rates resulting from the Federal Reserve’s maximum liquidity monetary policy.”

Pending sales measure signed contracts on existing homes, so it shows that buyers were out shopping during the month of June, just before the most recent surge in coronavirus cases. Sales had spiked in May, a stunning 44% compared with April.

The average rate on the 30-year fixed mortgage at the beginning of June was about 3.24%, and by the end of the month it dipped to around 2.95%, according to Mortgage News Daily. Rates have been hovering near record lows, around 2.9% since then. The Realtors anticipate rates to stay at or near 3% over the next 18 months.

This follows last week’s NAR report showing the sale of existing homes in June rose a stunning 20.7% monthly. That’s the largest monthly gain since the Realtors began tracking the data in 1968. This count is based on closings, and sales were still lower annually, by 11.3%.

One of the biggest issues remains the supply of existing homes for sale, which fell 18% annually in June to just 1.57 million homes, according to NAR. Based on the current sales pace, that represents a four-month supply. Last June 350,000 more homes were on the market. The supply was up just 1% monthly, from May to June. Yun said the price of lumber is hurting the builders.

“While the outlook is promising, sharply rising lumber prices are concerning,” Yun said. “A reduction in tariffs – even if temporary – would help increase homebuilding and thereby spur faster economic growth.”

Regionally, pending home sales rose in all four regions of the United States. In the Northeast sales increased 54.4% monthly and were down only 0.9% from a year ago. In the Midwest, pending sales rose 12.2% monthly and 5.1% annually. In the South the monthly increase was 11.9% and up 10.3% annually. In the West, pending sales jumped 11.7% monthly and were up 4.7% annually.

“The Northeast’s strong bounce back comes after a lengthier lockdown, while the South has consistently outperformed the rest of the country,” Yun said. “These remarkable rebounds speak to exceptionally high buyer demand.” Realtors raise their forecast for 2020!

The inspiration for today’s edition came from this original article:

If you are seriously considering moving right now you need to take action right now and talk to a reputable Real Estate & Mortgage Broker today, please call 281-222-0433 or visit:

Bill Rapp here with the Heartfelt and Hot in Houston Blog, and this is our newest segment: Texas homeownership rate sets record!

According to the latest Texas Housing Insight report from the Real Estate Center at Texas A&M University, the state’s homeownership rate hit a record 67.5 percent in June. Texas homeownership rate sets record!

“Despite falling sales in April and May, Texas’ second quarter homeownership rate was the highest since record-keeping began in 1996. Texas now lags the national rate by only half a percent, the smallest in eight years,” said Center Chief Economist Dr. James Gaines.

“National homeownership rates were higher across all races, including minorities,” he said. “Among Texas metros, Austin had the greatest increase in homeownership, rising almost 6 percentage points to 65.3 percent.”

The report has more good news. “The Center’s single-family housing sales projection suggests July numbers may show a complete recovery in single-family home sales,” said Gaines. “But continued improvement depends on the resurgence in contracted coronavirus cases and hospitalizations.”

Total June housing starts rebounded 27.9 percent, but a downward trend continues. Fewer than 26,000 single-family homes broke ground in the Urban Triangle (bounded by DFW-San Antonio-Houston) during the second quarter, a 4.3 percent decline.

Texas homes are selling at a record pace. A dwindling supply of active listings and a resurgence in home sales pulled Texas’ months of inventory down to an all-time low of 2.8 months. Inventories of homes for sale posted record lows of 1.6 and 2.6 months in Austin and San Antonio, respectively. Six months is considered a balanced market.

Approximately two months after the forced economic shutdown, Texas’ homes were on the market an average 64 days in June, slightly more than the previous month. Major metros recorded softer demand. Houston and San Antonio’s metrics exceeded the state average, rising above 64 and 65 days, respectively. The average home in North Texas sold after 59 days in Dallas and 51 days in Fort Worth. Austin was the exception, as the days-on-market decreased to 53 days compared with 57 days for June last year.

“Pent-up demand and record-low mortgage rates pushed total housing sales up 29.4 percent in June,” said Gaines. “Improvement, however, stemmed from a pickup in existing-home sales transactions as activity in the new-home market stalled after a year of solid growth.”

The state’s median home price jumped 3.9 percent to $249,100 in June after subdued growth to start the second quarter. Annual price appreciation accelerated 4.2 percent. Austin’s median price led the state at $324,700. The median price was $298,800 in Dallas and more than $250,000 in Fort Worth and Houston. San Antonio’s median home price increased to $240,800.

“Slower home-price growth and historically low interest rates increased housing affordability in Texas’ major metros during the second quarter,” said Gaines. “Houston and Fort Worth were the most affordable, with both indexes climbing to 1.8. That means a Texas family earning the median income could afford a home 80 percent more than the median sale price.”

Housing affordability in Austin and Dallas registered double-digit year-over-year gains, exceeding 1.7 and 1.6, respectively, with the former posting a five-year high. Meanwhile, San Antonio’s index rose steadily to 1.7.

“We expect July numbers will show a complete Texas rebound from the pandemic-induced shutdown,” said Gaines. “Texas single-family sales are estimated to increase 22 percent, while Houston should outshine the other metros with 25.2 percent growth.

“In Austin and Dallas, single-family sales are projected to bounce back 24.6 and 22.6 percent, respectively. San Antonio’s improvement is forecasted to be slightly lower than the state’s at 17.8 percent but still sizeable nonetheless.” Texas homeownership rate sets record!

The inspiration for today’s edition came from this original article:

If you are seriously considering moving right now you need to take action right now and talk to a reputable Real Estate & Mortgage Broker today, please call 281-222-0433 or visit:

Bill Rapp here with the Heartfelt and Hot in Houston Blog, and this is our newest segment: Pandemic creates Texas manufactured housing backlog!

Consumer demand for Texas manufactured housing rose in July, but COVID-19-related disruptions hindered the industry’s ability to meet orders and created a backlog. Pandemic creates Texas manufactured housing backlog!

“As coronavirus cases rose through the first half of July, the state’s manufactured housing plants had to operate with a reduced workforce,” according to Rob Ripperda, vice president of operations at the Texas Manufactured Housing Association (TMHA). “Employees with fevers or symptoms had to remain home and out of the factory until they cleared the return-to-work guidelines. These guidelines are set at the corporate level, and follow the recommendations posted by the Centers for Disease Control and Prevention.”

In addition to labor-supply constraints, the price of raw materials elevated. Lumber and steel account for the largest input share for manufactured housing. Rising material costs, however, were offset by higher sale prices.

The Real Estate Center at Texas A&M University and the TMHA have partnered to produce a monthly survey of business conditions and expectations surrounding the manufactured housing industry.

Overall, the manufacturers noted favorable levels of business activity and remained optimistic for the second half of 2020. Production is projected to increase in sync with sale prices, despite rising uncertainty and ongoing supply-chain disruptions.

Funded primarily by Texas real estate licensee fees, the Real Estate Center was created by the state legislature to meet the needs of many audiences, including the real estate industry, instructors, researchers, and the public. The Center is part of Mays Business School at Texas A&M University. Pandemic creates Texas manufactured housing backlog!

The inspiration for today’s edition came from this original article:

If you are seriously considering moving right now you need to take action right now and talk to a reputable Real Estate & Mortgage Broker today, please call 281-222-0433 or visit:

Bill Rapp here with the Heartfelt and Hot in Houston Blog, and this is our newest segment: Zillow partners with D.R. Horton!

Zillow has announced a partnership with homebuilder D.R. Horton, allowing buyers of new construction homes to sell their current homes directly to Zillow through its iBuying solution, Zillow Offers. Zillow partners with D.R. Horton!

D.R. Horton customers selling their current home through Zillow Offers receive an extended closing timeline of up to eight months, and the flexibility to modify the closing date to better align both transactions, the iBuyer said. Zillow partners with D.R. Horton!

“We are excited to partner with Zillow to bring more convenience and flexibility to the home-buying experience,” said Donald R. Horton, chairman of D.R. Horton, in a statement. “This is a great opportunity to provide our customers with new options to streamline the process of selling their existing home, and help them move into their new D.R. Horton home more efficiently.”

With Zillow Offers, sellers can avoid prepping their home for sale and hosting open houses or showings. Sellers start the process by answering a few questions about their home, upload photos and receive an offer in about 48 hours.

D.R. Horton homebuyers who sell their home via Zillow Offers may also be eligible to receive cash credits at closing on top of free local moving services.

This partnership will be marketed on all D.R. Horton home listings on Zillow. Zillow partners with D.R. Horton!

“Buying a new home is an exciting time, and we’re proud to collaborate with the nation’s largest home builder to help people unlock life’s next chapter,” said Arik Prawer, president of the Zillow Homes Division in a statement. Zillow partners with D.R. Horton!

The inspiration for today’s edition came from this original article:

If you are seriously considering moving right now you need to take action right now and talk to a reputable Real Estate & Mortgage Broker today, please call 281-222-0433 or visit:

Bill Rapp here with the Heartfelt and Hot in Houston Blog, and this is our newest segment: Mortgage Rates Hit the 3% Wall!

Two months ago, I wrote a column with the headline “Don’t Expect Mortgage Rates to Drop Much More.” At the time, the average for a 30-year fixed loan was near its record low of 3.23% but still much higher than what might be expected, given the going yield of 0.7% on benchmark 10-year U.S. Treasuries.

Even as mortgage rates continued to slide in the following weeks, to 3.15%, then 3.13%, I was confident that my thesis would hold up and the spread between the two rates would remain historically wide. After all, the 10-year Treasury yield had dropped by eight basis points during that time as well. Mortgage Rates Hit the 3% Wall!

July was shaping up to be a different story. In the three weeks through July 16, the 30-year mortgage rate tumbled in each period, from 3.13% to 2.98%, marking the first time in 49 years of Freddie Mac data that it fell below 3%. Treasury yields, by contrast, had only dropped by a few basis points. The difference between the two was on pace to reach the narrowest since February, before the coronavirus pandemic. Perhaps I underestimated the mortgage market’s ability to recalibrate.

Then, at last, it hit the 3% wall. Mortgage rates in the U.S., as measured by Freddie Mac, increased last week for the first time since early June, climbing to 3.01%.’s measurement also ticked higher, to 3.15% from a record-low 3.13%. All this, even though Treasury yields were grinding ever-lower.

At a high level, housing demand is unusually strong. Purchases of previously owned homes posted their largest monthly advance on record in June, according to data last week from the National Association of Realtors. Meanwhile, purchases of new single-family houses raced to an almost 13-year high in the same month, exceeding all economists’ forecasts. Those data points were backed up by quarterly results from PulteGroup Inc. that showed home orders for June jumped 50% from a year earlier, led by a spike in first-time buyer interest. Given that the company tends to focus on more expensive homes than its peers, it supports the theme of white-collar workers who previously rented in large cities opting for more space to work remotely in the suburbs.

On top of that, homeowners have shown a renewed interest in refinancing, with the share of refis as a percentage of total applications climbing to a 10-week high as of July 17, according to MBA data. The rate falling below 3% might have “set off alarm bells” for those who hadn’t been paying attention before, Mark Vitner, senior economist at Wells Fargo Securities, told Bloomberg News’s Prashant Gopal. In March, the droves of people looking to lower their mortgage rate created a backlog and allowed originators to retain pricing power. They could very well be holding firm now at 3%, especially if they’re scaling back their risk tolerance given the uncertain economic outlook.

It’s hard to prove definitively that 3% is a “line in the sand” in mortgages, particularly when interest-rate records are shattered across financial markets (see investment-grade corporate bond yields at 1.89%, for instance). But one way to test this theory is by incorporating yields in the mortgage-backed securities market, in addition to the 10-year Treasury rate. As William Emmons, lead economist with the Federal Reserve Bank of St. Louis’s Center for Household Financial Stability, wrote in a report last month, this creates two distinct spreads that reflect both the retail and wholesale portions of the overall mortgage market:

Most mortgage originators — especially those that are not banks — operate like brokers or dealers in mortgages. That is, they keep one eye on the wholesale market — the prices paid by Fannie Mae and Freddie Mac for mortgages — and the other eye on retail mortgage-market conditions. This is known as the “originate-to-distribute” model of mortgage lending, in contrast to the “buy-and-hold” model of mortgage lending that was the norm 50 years ago.

The retail mortgage market generally is very competitive, so the difference between the Freddie Mac Survey 30-year mortgage rate (the retail price) and the yield on Fannie or Freddie mortgage-backed securities (the wholesale price) reflects the gross profit margin available to a mortgage originator. This must cover marketing costs, short-term financing costs, other overheads and compensation for risk; net profit is what is left over.

Even without knowing the exact fixed costs, it’s clear that for whatever reason, mortgage originators have not gone back to business as usual by any stretch. That’s in stark contrast to the MBS market, where the Fed is actively buying billions of dollars of debt each month to bring yields in line with their historical spread to Treasuries.

Here’s a chart dating back to 2007 that shows the spread between the headline 30-year mortgage rate (3.01%) and the benchmark 30-year MBS yield (1.43%). At about 160 basis points, it remains almost twice the historical average and higher than just about any time during the record U.S. economic expansion:

In that June report, Emmons at the St. Louis Fed concluded that the historically wide primary-market spreads should revert to a more normal level “in the near future,” which could push the 30-year mortgage rate down 50 basis points or more. Instead, that gap has widened slightly since mid-June, while the secondary-market spread has dropped by about seven basis points.

Now, it’s still early days in this most unusual economic downturn, and perhaps it’s only a matter of time before mortgage originators capitulate and steadily offer rates lower than 3%. But the business has never faced long-term U.S. yields this low before. It’s telling that the lowest coupon on a 30-year MBS is still 2%, while the U.S. Treasury has auctioned 30-year bonds with 1.25% coupons for months.

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, in typical fashion, launched into a monologue against mortgage regulations during the bank’s second-quarter earnings call earlier this month. He said the reason mortgage rates aren’t 1.6% or 1.8% “is because the cost of servicing and origination is so high, it’s obviously got to be passed through — it’s high because enormous amount of rules and regulations are put in place that do not create safety and soundness.”

On the one hand, the subprime mortgage crisis is still fresh in the minds of the Fed and other financial regulators, so it seems unlikely to expect a drastic loosening of rules around lending. And yet lower mortgage rates are a crucial way that easier monetary policy reaches the American public. The central bank’s asset purchases have mostly done what they can by normalizing that secondary-market yield spread between MBS and Treasuries.

That suggests the next leg lower in mortgage rates would have to come from originators settling for less than 3%. It’s hard to imagine that happening on a widespread level, given the murky economic outlook. Banks, for their part, are clearly bracing for turbulence ahead, with some $35 billion set aside for bad loans.

Put it all togetheic, this looks as if it could be about as good as it gets for mortgage rates. Mortgage Rates Hit the 3% Wall!

The inspiration for today’s edition came from this original article:

If you are seriously considering moving right now you need to take action right now and talk to a reputable Real Estate & Mortgage Broker today, please call 281-222-0433 or visit:

Bill Rapp here with the Heartfelt and Hot in Houston Blog, and this is our newest segment: Want More Housing?

Before Covid-19 took hold of the national consciousness, the YIMBY movement — of those saying “Yes In My Backyard” to housing development — appeared ready to go mainstream. More and more people recognized that NIMBYism run amok and codified into local laws leads to fewer housing options, drastically raising prices in cities and towns alike, and contributing to inequality. Now, in a time of pandemic-driven budget cuts and unemployment, the importance of housing affordability is growing. Want More Housing?

Policy makers can deliver it, and without budget outlays, by simply allowing more housing — particularly low-cost housing — to be built. But the path to housing abundance isn’t quite as easy as some recent reforms, narrowly focused on one particular type of zoning, might lead us to believe. Separating the long-conflated ideas of owning or renting housing from securing a large and expensive piece of land will require more effort.

Encouragingly, city and state leaders from California to Virginia have been pushing forward, focused on loosening the stranglehold of single-family zoning rules — those banning all but detached houses on their own plots of land — that dominate most residential land in the country. The oversize emphasis on ending this zoning, however, distracts from the other barriers to building more homes at lower prices in the places Americans want to live. The housing affordability coalition must address the entire suite of regulations that stymie new, low-cost construction.

Although single-unit zoning limits these useful types of housing, so do myriad other restrictions on how and where housing can be built: minimum lot size requirements, parking requirements, height limits and more.

Take Minneapolis. In 2019, city leaders there became the first to eliminate single-family zoning. Its code was amended to allow triplex construction on all land that was previously designated for detached homes only. This was a huge step. Yet plenty of rules still stand in the way of new multifamily housing.

The reform was not paired with any increase in allowable height or size for structures themselves. So three units can now be built where only one was permitted before, but the allowable built space is the same. It remains to be seen how profitable it will be for homeowners or builders to subdivide houses or build two or three new units that are much smaller than a single-unit house would be permitted to be. Allowing larger buildings could make more triplex conversions more comfortable and profitable.

Last year, Oregon became the first state to preempt single-family zoning by requiring localities with at least 10,000 residents to allow duplexes, and in some cases fourplexes, on each lot. However, this reform didn’t change the broad authority municipalities have to block certain types of housing, like requirements that homes be built on large lots with significant open space around each new structure. On large lots, duplexes or fourplexes can come with the downsides of attached housing (like noisy neighbors) without the benefits of a dense neighborhood (like living within walking distance of amenities).

Houston’s rules ensure that three new units can be spacious, useful and an improvement on the detached houses they replace.

For a proven reform, look at Houston, arguably the most pro-housing city in the country. It doesn’t have use-zoning, which means that housing — including apartments and other multifamily housing — is permitted anywhere private covenants don’t restrict it. In 1998, Houston policy makers reduced the minimum-required lot size for a house from 5,000 square feet down to 1,400 square feet on all of the land within the city’s I-610 loop. This made it possible to replace a single-family house with three. In 2013, the 1,400-square-foot minimum lot size requirement was expanded to cover the entire city.

Thousands of townhouses have since been built that wouldn’t have been permitted before. Houston now boasts a median home price below the national median in spite of decades of rapid job growth and increasing population. A typical house in Houston costs less than $200,000, compared with nearly $300,000 in Atlanta or a staggering $680,000 in San Diego. In other booming cities, more jobs and new residents have led to skyrocketing prices but few new homes.

On paper, Houston’s decision to reduce minimum lot sizes seems similar to eliminating single-family zoning and allowing more than one unit per lot. The difference is that Houston’s other flexible land-use regulations allow homebuilders to deliver those new units in a cost-effective and desirable way. Houston’s rules ensure that three new units can be spacious, useful and an improvement on the detached houses they replace.

The crucial first steps taken in Minneapolis, Oregon and elsewhere might signal more changes down the road. But if dozens of rules limit where and how new housing can be built, getting rid of one constraint doesn’t accomplish much.

An example from New Jersey illustrates the importance of small details in land use policy. Palisades Park, a small town not far from Manhattan, has two-family zoning across the majority of its land. Duplexes, either side-by-side or stacked, are permitted on the same minimum lot size as is required for single-family homes. As a result, the majority of housing units are duplexes, and Palisades Park has accommodated a doubling of its population through infill development. Other nearby localities allow two-family homes only if they sit on larger lots than single-family homes, or if they’re arranged one on top of the other rather than side-by-side. These other jurisdictions have seen less two-family construction and are doing less to accommodate regional population growth.

Tweaking zoning codes doesn’t necessarily make housing construction feasible at lower price points. Leaders can’t always know what type of housing homebuilders in their locality will be able to profitably build. This depends on local demand, the existing housing stock and the milieu of regulations. That’s why reforms that appear to allow more housing to be built on paper may not result in the flexibility homebuilders actually need.

When that’s the case, and housing supply and affordability aren’t moving in the right directions, leaders need to identify whatever unnecessary barriers to low-cost construction remain. Want More Housing?

The inspiration for today’s edition came from this original article:

If you are seriously considering moving right now you need to take action right now and talk to a reputable Real Estate & Mortgage Broker today, please call 281-222-0433 or visit:

Bill Rapp here with the Heartfelt and Hot in Houston Blog, and this is our newest segment: Paying your mortgage biweekly!

The current low-interest-rate environment has given everyone something to talk about besides COVID-19. Specifically, do I want to stick with my current mortgage or refinance? Is now the right time to buy a home? How much can I save by taking advantage of the record low-interest rates right now?

Whether you seek to refinance your current loan or are currently shopping for a new home, the best place to start when making mortgage decisions is to compare rates and lenders via an online tool like Credible. Paying your mortgage biweekly!

Another important decision for potential homeowners (or those who want to change their bill pay structure) is to consider whether to pay the mortgage monthly (in 12 full payments a year) or bi-weekly (26 half-payments a year.)

Paying bi-weekly may feel too aggressive for your current budget, but the math behind this small “trick” makes it easier to pay down your mortgage faster, with minimal impact on your monthly budget and current lifestyle.

The secret bonus of making bi-weekly mortgage payments

Since there are 52 weeks in a year, 26 bi-weekly payments mean homeowners who pay this way are making 13 monthly payments each year, instead of the standard 12. This equates to just one additional mortgage payment a year, but this one extra payment substantially shortens the lifespan of the loan.

A homeowner with a $300,000 loan at a 4 percent interest rate makes one additional monthly payment each year. This shortens payoff on a standard 30-year mortgage by five years and saves over $35,000 in interest over the life of the loan.

Even if you don’t plan on staying in the home for 30 years, paying bi-weekly builds more equity in the home since you’re paying down more of the principal each time. More equity in the home means a homeowner can take advantage of a home equity loan for large purchases or leverage the equity to get into a larger home down the road.

If the interest rate on your current mortgage loan is higher than these averages, it may make sense to consider a mortgage refinance loan. You can visit Credible to compare rates and lenders in your area.

More benefits to paying bi-weekly

* Shortens the term of the loan: Paying bi-weekly means you’ll get the lower payments of a 30-year term, without the aggressive (and more expensive) monthly payment tied to a 15-year mortgage.

* Saves money: The money saved paying bi-weekly may not feel like a lot in the months the third payment hits, but over time the savings in interest could fund a large purchase such as a kitchen renovation, a college tuition payment, or a contribution toward retirement.

* The extra payments go toward the principal: Any extra mortgage payments reduce the principal of the loan, which means each time you make an extra payment you pay less in interest and “own” a little bit more of your home.

For new homeowners who pay bi-weekly from the start of the loan, they won’t even “feel” the extra payment leaving their bank account each month. For current homeowners, it’s easy to set-up a bi-weekly payment option even if your lender doesn’t offer one.

Simply take your monthly mortgage payment ($1,432 in the $300,000 example we used in this article) and divide by 12. Using our example, this comes out to $119.33.

Each month, make an additional principal-only payment of $119.33, or automatically transfer this amount to a savings account and pay a full monthly payment at the end of the year. Be sure to mark any additional payments as principal only. This ensures the money goes toward your loan amount and not the interest for the next month, which won’t end up saving you anything over the life of the loan. Your lender should have the option to earmark any extra payments as principal only online.

One final tip: Paying bi-weekly can have a big impact on how much you pay for your mortgage overall. It’s worth it to investigate mortgage options via Credible. Before increasing your payments, ensure your lender doesn’t charge any pre-payment penalties or hidden processing fees for the extra payment each month. Paying your mortgage biweekly!

The inspiration for today’s edition came from this original article:

If you are seriously considering moving right now you need to take action right now and talk to a reputable Real Estate & Mortgage Broker today, please call 281-222-0433 or visit: