Chris Nooney

The Nooney Team

An Overview Of Mortgage Points

An Overview Of Mortgage PointsMortgage points, also known as discount points or origination points, are fees paid by borrowers at closing to reduce the interest rate on their mortgage loan. Each point typically costs 1% of the total loan amount and can lower the interest rate by anywhere from 0.125% to 0.25%.

There are two types of mortgage points: discount points and origination points. Discount points are used to buy down the interest rate on the loan, while origination points are used to cover the lender’s administrative costs.

Borrowers may choose to pay mortgage points in order to lower their monthly mortgage payments or to reduce the overall amount of interest paid over the life of the loan. However, paying points may not always be the best financial decision, as it depends on factors such as the borrower’s financial situation, the length of time they plan to stay in the home, and the current interest rate environment.

It is important for borrowers to carefully consider the costs and benefits of paying mortgage points, and to compare offers from multiple lenders to ensure they are getting the best deal possible.

When to Use Mortgage Points

Mortgage points can be used by borrowers to lower the interest rate on their mortgage loan and potentially save money on interest over the life of the loan. However, whether or not it makes sense to pay mortgage points depends on a variety of factors, including the borrower’s financial situation, the length of time they plan to stay in the home, and the current interest rate environment.

Here are a few situations where it may make sense to use mortgage points:

  • Long-term homeownership: If a borrower plans to stay in their home for a long period of time, paying mortgage points upfront to lower the interest rate could result in significant long-term savings.
  • High-interest rates: When interest rates are high, paying mortgage points may be a good strategy for reducing the interest rate and lowering monthly mortgage payments.
  • Large loan amounts: Borrowers with large loan amounts may benefit from paying mortgage points to reduce the interest rate and save money over the life of the loan.
  • Strong financial position: Borrowers with strong financial positions, including a high credit score and stable income, may be more likely to qualify for lower interest rates and may benefit from paying mortgage points to lower the rate even further.

The decision to pay mortgage points should be based on a careful analysis of your unique financial situation and goals and should take into account the costs and benefits of paying points compared to other options.

What’s Ahead For Mortgage Rates This Week – May 30, 2023

What's Ahead For Mortgage Rates This Week - May 29, 2023Last week’s economic news included readings on new and pending home sales and inflation. The final monthly reading for May consumer sentiment was released along with weekly readings on mortgage rates and jobless claims.

Shortage of previously-owned homes for sale directs buyers to new homes

Homeowners weren’t in a hurry to sell their homes due to the low mortgage rates they obtained during the pandemic. Current mortgage rates are higher than pandemic-era rates, which influenced homeowners to stay in their homes and keep their lower existing mortgage rates. Home buyers turned to new home developments as an alternative to shopping for a home within the slim supply of available previously-owned homes.

The number of pending home sales was unchanged from March as compared to the expected reading of an 0.80 percent increase in pending sales and the March reading of a -5.20 percent decrease in pending home sales. Rising mortgage rates and concerns over the economy sidelined some sellers and would-be home buyers. Rising inflation continued to impact consumers as prices for goods and services rose by 0.40 percent in April as compared to the March increase of 0.10 percent. Year-over-year inflation rose to 4.40 percent in April as compared to the March year-over-year inflation reading of 4.20 percent. 

Consumer concerns about inflation and recession were supported by the government-sponsored mortgage organization  Fannie Mae, which predicted a recession in the second half of 2023.

Fed forecasts a recession and raises key interest rate range

The minutes of the Federal Reserve’s Federal Open Market Committee meeting revealed that policymakers were divided on the Federal Reserve’s monetary policy decision to raise its key interest-rate range to 5.00 percent and 5.25 percent. Some Fed members indicated that May’s interest rate hike may be the last for the near future as expectations of a recession rose. 

Mortgage rates and jobless claims rise

Freddie Mac reported higher mortgage rates last week as the average rate for 30-year fixed-rate mortgages rose by 18 basis points to 6.57 percent. The average rate for 15-year fixed-rate mortgages rose by 22 basis points to 5.97 percent.

229,000 new jobless claims were filed last week; this reading fell short of the expected reading of 245,000 initial claims filed and exceeded the prior week’s reading of 225,000 claims filed.

What’s Ahead

This week’s scheduled economic reporting includes readings on public and private-sector jobs and the national unemployment rate. Weekly readings on mortgage rates and jobless claims will also be released. 

What is the Difference Between a Reverse Mortgage and a Home Equity Conversion Mortgage?

What is the Difference Between a Reverse Mortgage and a Home Equity Conversion Mortgage?A reverse mortgage and a home equity conversion mortgage (HECM) are both types of loan products that allow homeowners to tap into the equity they have built up in their homes. However, there are some important differences between the two.

A reverse mortgage is a type of loan available to homeowners who are 62 years of age or older. With a reverse mortgage, the lender makes payments to the borrower, which can be taken as a lump sum, line of credit, or regular payments. The loan is paid back when the borrower dies, sells the home, or permanently moves out of the property.

On the other hand, a home equity conversion mortgage (HECM) is a specific type of reverse mortgage that is insured by the Federal Housing Administration (FHA). To qualify for an HECM, the homeowner must be 62 years of age or older and own their home outright or have a low mortgage balance that can be paid off with the proceeds from the HECM.

One of the key differences between a reverse mortgage and an HECM is the way the loan is structured. With a reverse mortgage, the lender makes payments to the borrower, while with an HECM, the borrower can receive payments from the lender or choose to receive a line of credit that they can draw on as needed.

Another important difference is the cost. HECMs are insured by the FHA, which means that they come with certain fees, including an initial mortgage insurance premium, an annual mortgage insurance premium, and other closing costs. Reverse mortgages, on the other hand, may come with different fees depending on the lender.

Overall, while both a reverse mortgage and an HECM can provide homeowners with a way to access the equity in their homes, there are important differences to consider when deciding which option is right for you. It’s important to do your research and speak with a qualified financial professional to understand the pros and cons of each option and make an informed decision.

Pursuant to the requirements of Section 157.007 of the Mortgage Banker Registration and Residential Mortgage Loan Originator License Act, Chapter 157, Texas Finance Code, you are hereby notified of the following: CONSUMERS WISHING TO FILE A COMPLAINT AGAINST A MORTGAGE BANKER OR A LICENSED MORTGAGE BANKER RESIDENTIAL MORTGAGE LOAN ORIGINATOR SHOULD COMPLETE AND SEND A COMPLAINT FORM TO THE TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, 2601 NORTH LAMAR, SUITE 201, AUSTIN, TEXAS 78705. COMPLAINT FORMS AND INSTRUCTIONS MAY BE OBTAINED FROM THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV. A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT 1-877-276-5550. THE DEPARTMENT MAINTAINS A RECOVERY FUND TO MAKE PAYMENTS OF CERTAIN ACTUAL OUT OF POCKET DAMAGES SUSTAINED BY BORROWERS CAUSED BY ACTS OF LICENSED MORTGAGE BANKER RESIDENTIAL MORTGAGE LOAN ORIGINATORS. A WRITTEN APPLICATION FOR REIMBURSEMENT FROM THE RECOVERY FUND MUST BE FILED WITH AND INVESTIGATED BY THE DEPARTMENT PRIOR TO THE PAYMENT OF A CLAIM. FOR MORE INFORMATION ABOUT THE RECOVERY FUND, PLEASE CONSULT THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV. © 2021 Draper and Kramer Mortgage Corp. All Rights Reserved.
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Christopher James Nooney (NMLS ID # 179371 (www.nmlsconsumeraccess.org) TX:179371) Roger G Ryman Jr. (NMLS ID # 180704 TX:180704) Michele Domenico Zugheri (NMLS ID # 179379 TX:179379) are agents of Draper and Kramer Mortgage Corp. (NMLS:2551) an Illinois Residential Mortgage Licensee located at 1431 Opus Place, Suite 200, Downers Grove, IL 60515, 630-376-2100. TX: Draper and Kramer Mortgage Corp. NMLS ID 2551.

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