Jason Hartman hosts Investment counselor Adam Schroeder, to discuss the current mortgage environment and interest rates investors should expect for the month.
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit
Welcome to the young wealth show where you’ll truly learn how to make, spend and invest money for an awesome life. Get the real life stuff that wasn’t part of your school curriculum. Young will gives you innovative new ways of dealing with your finances, as well as the skills and tools you’re going to need to survive and be successful out on your own. Let the young wealth show be your GPS to take you from clueless to clued in. here’s your host, Jason Hartman dunwell.
Jason Hartman 0:50
Welcome to the mortgage minister This month we are joined today by one of the lenders from Jason’s network. And what are we looking at out there in the mortgage market?
Adam Schroeder 0:58
Yeah, so right now has been moving in our client direction, rate wise, we’ve seen that really since the beginning of the year, you know, the market is probably down or the rates are probably better by a good three eight to half a point since prior to the new year. So that’s been a very positive downward trajectory for us as it relates to mortgage rates and for all of our investor clients who are looking to you know, acquire new properties, but also for those who are looking to take some equity out of their homes. They aren’t getting the opportunity to refinance to a slightly lower rate than they originally had. We hear about the Coronavirus. We hear about all this stuff going on. How has that been impacting the bond market? Well, with the onslaught of the virus, what we’ve seen is a little bit of panic in the stock market as it relates to that as the stock market kind of weakened a little bit last week, our bond market improved on that so therefore mortgage rates went down. So anytime you’ve got some money flowing from the stock market into bonds, it’s more of a safe haven for investors. Our bond market our rates are tied to the bond market. So typically our mortgage rates would improve a little bit as the bond market is better now, as of this morning Friday, we saw a large hit to the stock market on the fear of the coronavirus, spreading and even calling somewhat of a pandemic globally. And then yesterday was kind of a mitigated new day there wasn’t much going on. But today and this morning, we’ve seen the stock market jump over 450 points and then we gained all the losses that they took last week, primarily because the Bank of China has begun to prop up the stock market and they’ve come in and they’ve started buying billions and billions of dollars worth of stock as of today. So you know, we’re seeing some reactions in the stock market. You know, the Chinese coming in and saying we can control any potential pandemic here as it relates to Coronavirus. We’re not going to let our stock market or even global stock markets, they go on supportive. So what they’ve done is come in with I believe it was over almost $400 billion worth of stock purchases today so the market has rebounded and it’s almost like stock market is not too concerned now about the Coronavirus, interesting with good credit $100,000 house 20 or 25%? down
Jason Hartman 3:12
what rate roughly would they be looking at,
Adam Schroeder 3:15
let’s say $125,000 purchase loan amounts 100 grand that’s 20% down my rate today there for that client with excellent credit in 4.75%. You might even get to 4.6 to 5% on a good day. Now it’d be the same purchase price and you put 25% on same credit profile, we’re looking at 4.125 as a low in the market, maybe even four and a quarter depending on the day. You know, I would say overall 4.6 to five or 20% down for an ache for 25% down both options with no point. So these are red. These are low we’ve seen in rates and
Jason Hartman 3:54
some time. So with the 25% down if someone paid points, is it possible that they’re looking at 4% or even lower.
Adam Schroeder 4:00
Oh, sure, yeah, you know, 25% on paying a point would likely get you down to somewhere around 3.875 or even 3.75. Now, you might say 1.1 or 1.2 and go to 3.75%. But that’s definitely a viable option.
Jason Hartman 4:17
So let’s get down into like primary residence rates at that point.
Adam Schroeder 4:22
Yeah. So when we look at those options, and we work out the numbers for clients who are interested in paying points, what we need to do is look at the break even point is for that expense for that additional cost to buy down the point of buy down the race. So generally speaking, we tell our clients if you can break even on the cost of paying points in two and a half to three years, then it’s it’s likely worthwhile simply because this is a new 30 year fixed rate mortgage, because it’s long term debt, the suitability here that you’re going to keep this property for a long time and once you can break even into After three years on the cost of the point on an investment property purchase, you know, when the loan amounts less than 100, grand, you know, generally makes sense to look at paying points and take the lower rate long term.
Jason Hartman 5:11
How do you think you know, China’s coming in and propping up the stock market? Do you think that’s going to improve sentiment enough that our rates will start going up a little bit start edging
Adam Schroeder 5:19
up? I don’t think so. I mean, you’re always going to have, you know, fluctuation in the market, it never moves in one direction in a straight line. I think overall for 2020 most folks within the real estate industry from builders to realtors, you know, the, the associations of all these departments are cogs in the wheel, so to speak, in terms of the industry managers, particularly, most economists are telling us that you know, we predict 2020 to be a relatively stable year in terms of rate. So we don’t particularly see the market moving out of recliner, three quarters of a point in any one direction. You will see your daily fluctuation in the market have an anchor point or a quarter point. Continue, because that’s quite typical as the market moves up and down and factors come into effect the market, but overall throughout 2020, the general prediction across the industry is that rates will remain relatively steady and not move in any one direction too high or too low.
Jason Hartman 6:14
So we’re looking at rates 5% or less, most likely for the rest of the year.
Adam Schroeder 6:19
I would imagine. So for 20% down depending on the credit profile, of course, to a certain degree, the loan amounts. Yes, we’re looking at probably 20% down below five and 25% down, certainly below four and a half.
Jason Hartman 6:32
Oh, well, that’s really great for us. Is there anything else going on in the market that looks like it might be impacting us moving forward?
Adam Schroeder 6:39
Well, obviously we have an election year, you know, so generally speaking, and historically speaking, whenever we have an election year, our market rates tend to be relatively steady in an election year short of sort of anything crazy happening geopolitically. So for the most part, we are anticipating, you know, that being a factor in keeping our rates relatively steady as well.
Jason Hartman 7:00
All right, is there anything else you think is important for the listeners to know?
Adam Schroeder 7:03
Well, I just think that now it’s a great opportunity to grow your portfolios within the turnkey industry. It’s growing every year that we’ve been involved with it. It certainly has gained some attraction among overall among investors. So finding the right partner and finding the right inventory is important now as ever, so if there’s anything we can do in that regard, please let us know. We say Jason’s team of investment counselors can point you in the right direction. And one thing I realized I forgot to ask mortgage starts for your company. How have those been increasing? decreasing holding steady? What have y’all seen there? Tons of applications for mortgage starts of y’all. Oh, the turnkey stuff for our world. Yeah, we’ve seen application certainly increase, you know, a lot of that as a little bit to do with the decrease in rates because we’re getting some refi volume now refinance volume, but overall as a relates to new purchase acquisitions, and our team has certainly grown in January fundings and closings in January and applications in January. We’re certainly up maybe about 20% over December.
Jason Hartman 8:03
Oh, wow. And how has the the refi market you know that as the rates have been dropping, that’s becoming more and more popular. What kind of refi market are we looking at right now,
Adam Schroeder 8:13
generally speaking, for the folks who had investment property portfolio, we’re refinancing properties that they may have held in their portfolio for some time, and they’ve had a chance to grow some equity there, they may have acquired the home to a slightly higher interest rate, particularly coming out of the recession. So now they’re getting a chance to lower the rate and tap into equity on some other historical homes or that they’ve had in their portfolio. The newer acquisitions in the portfolio are still, you know, relatively fresh, if you like from an equity growth perspective. So there isn’t a lot there. We’re also seeing some folks will refinance. You know, they’re dead into 15 year fixed rate mortgages for their own cycle, and yet still take equity out of the home so that they don’t see because of the lower rates, they don’t see a payment shock come up here. really paying, but you had a chance to arms off a little bit sooner. And again, these are homes that have been historically in their portfolio.
Jason Hartman 9:06
Well, thank you very much for your time today. Appreciate it.
Adam Schroeder 9:09
Jason Hartman 9:12
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.