Another reason to own a home: Cheaper car insurance

WASHINGTON – Feb. 17, 2016 – Major auto insurance companies charge good drivers as much as 47 percent more for basic liability auto insurance if they don’t own their home, according to a new analysis of premiums by the nonprofit Consumer Federation of America (CFA)

Based on a sampling of insurance quotes across the country for a 30-year old safe driver, CFA found that premiums averaged seven percent higher – about $112 per year – for people who rent rather than own. Liberty Mutual penalized renters most with an average higher premium of $307 per year (19 percent).

CFA criticizes the higher auto rate charged to renters, noting that many are low- and moderate-income Americans. According to Federal Reserve Board, the median income of renters in the U.S. was $27,800 in 2013 compared with $63,400 for homeowners.

“A good driver is a good driver whether she rents or owns her home,” says J. Robert Hunter, CFA’s insurance director.

For the analysis, CFA tested rates for minimum limits liability coverage in 10 cities from the nation’s largest insurers – State Farm, Geico, Allstate, Progressive, Farmers, Liberty Mutual and Nationwide. It solicited premiums through company websites in each city for a 30-year old female motorist with a perfect driving record and a 2005 Honda Civic. The only characteristic altered during the testing was whether she owned or rented her home.

CFA says the rate varied noticeably depending on the insurance company.

“For example, Allstate charged renters in Tampa 19 percent more than it charged homeowners; Liberty Mutual charged Baltimore renters 23 percent more and 26 percent more in Newark; and Farmers Insurance charged renters in Louisville 47 percent more ($768) than homeowners for a basic auto insurance policy,” according to CFA.

Geico was the only company that did not consider homeownership status.

The only premium decrease for renters was in Chicago, where Allstate lowered rates by 11 percent for renters compared with premiums charged to homeowners.

© 2016 Florida Realtors®

Banks start to ease 20% downpayment for jumbo loans

NEW YORK – Feb. 17, 2016 – Banks and other lenders are easing the 20 percent downpayment requirement on jumbo loans.

A minimum 20 percent downpayment became an industry standard for jumbo mortgages following the real estate bust, but lenders increasingly approve jumbo loans with downpayments of 10 percent and sometimes less.

Some mortgage bankers say that younger borrowers have stellar credit ratings and sufficient assets and incomes, but high rents don’t allow them to amass enough cash for a 20 percent downpayment.

Newer loan products from big banks, credit unions and online lenders offer jumbo mortgages with loan-to-value (LTV) ratios of 85 to 90 percent. San Francisco-based online lender SoFi says that high LTV jumbo mortgages account for about 80 percent of its mortgage lending – and 65 percent of its borrowers are first-time homebuyers.

Lenders typically enforce strict qualification rules and charge higher interest rates for borrowers putting down less than 20 percent, with Wells Fargo’s current rates for an 89.9 percent LTV jumbo mortgage about a quarter to three-eighths of a percentage point higher than loans with a 20 percent downpayment.

Source: Wall Street Journal (02/11/16) Martin, Anya

© Copyright 2016 INFORMATION, INC. Bethesda, MD (301) 215-4688

2016 A good year to own a home

NEW YORK – Feb. 19, 2016 – A report by the Federal Reserve Bank of New York finds that Americans paid 8 percent less on their mortgages in 2015 than they did in 2008, even as the amount of principal paid off rose by 41 percent.

This means homeowners paid less each month on their mortgage while also seeing a dramatic rise in home equity.

“That’s a major increase in savings, and a major improvement in the balance sheets for these households,” says Andrew Haughwout, a senior vice president at the New York Fed.

According to the report, the amount of mortgage principal paid down by homeowners totaled $288 billion last year, up by $118 billion from 2006, although the total amount of mortgage debt outstanding was the same in both years. That can be attributed to low borrowing costs that prompted more homeowners to refinance into less expensive loans, and borrowers taking less equity out of their homes than they did a decade ago. In addition, outstanding mortgage debt is older today, so a greater share of the monthly payment is put toward paying down the principal.

The report also indicates that tighter mortgage standards have played a role by preventing many first-time buyers from achieving homeownership, which means borrowers who have had more time to build equity account for a greater share of total mortgage debt.

Finally, there is a smaller pool of highly leveraged homeowners due to the wave of foreclosures during and after the financial crisis.

Source: American Banker (02/12/16) Wack, Kevin

© Copyright 2016 INFORMATION, INC. Bethesda, MD (301) 215-4688

9 30-year mortgage rates unchanged this week

WASHINGTON (AP) – Feb. 19, 2016 – Average long-term U.S. mortgage rates were unchanged this week, but remained at historically low levels amid worries about the global economy.

Mortgage buyer Freddie Mac says the average rate on a 30-year, fixed-rate mortgage remained at 3.65 percent this week after dropping for six straight weeks. The average rate on 15-year fixed-rate mortgages was also unchanged from last week at 2.95 percent after falling for five consecutive weeks.

The average rate on five-year adjustable rate mortgages blipped up to 2.85 percent this week from 2.83 percent last week.

Interest rates are still low two months after the Federal Reserve raised the short-term rate it controls for the first time since 2006. Worries about the global economy have coaxed investors into seeking the security of U.S. Treasurys. Their purchases have pushed down the yield on the benchmark 10-year Treasury note, which influences long-term mortgage rates, to 1.81 percent from 2.27 percent before the Fed hiked rates Dec. 16.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fees for 30-year and 15-year mortgages were unchanged at 0.5 point.

The fee on a five-year adjustable rate mortgage remained at 0.4 point.

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