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Mortgage Matters

Click on Detroit - Your Mortgage Matters

Channel 4 - Click on Detroit - You Mortgage Matters. Q & A with Dan Milstein, Rick Richter and Mike Hyman.

Mortgage Matters: Examining the factors driving interest rate increases (column)

I know, I know … I have been saying this for some time now: Mortgage interest rates are increasing. In my professional opinion, the increase to rates has been a bit overdue. But I do think it's important to keep where we are in context and to understand the entire situation, if you will.

For starters, there are countless factors that go into determining an interest rate for a specific scenario. Those factors include credit rating, amount of down payment or equity, loan program, property type, property classification, timeframe for closing, fees or "points" being paid to buy down the interest rate and the loan amount, just to name a few.

Mortgage rates more or less across the board are up from their historical lows by roughly 0.75 percent to a full 1 percent. For "most" scenarios, interest rates are now in the mid- to high 4 percent range. This level is up from the mid-3 percent range when mortgage rates were at their historical lows. While the mid- to high 4 percent range may seem a significant increase, today's interest rates are still not far from the bottom of the market.

Real-Estate Matters: If mortgage nearly paid off, don't gum up works

Q: I have 4½ years left on my mortgage. I also have a home-equity loan. Would it be wise to combine the two into one loan?

A: Although it sounds simpler to make one payment instead of two, getting a new loan would be just about the worst decision you could make.

At this point in the amortization cycle, every mortgage payment you make toward your primary home loan contains very little interest and is mostly big chunks of principal. So, you're paying it off virtually dollar for dollar. This means that a $1,000 mortgage payment is probably paying down what you owe on the loan by about $900. Early on in your loan, you paid mostly interest and very little principal, but now it's the reverse.

It's hard to imagine another loan product that would benefit you quite as much if the goal is to get your primary mortgage paid off as quickly as possible.

Having said that, we don't know how much is left on your home-equity loan or what interest rate you have on that loan. Say you have $20,000 still owing on your equity line and $50,000 left to pay on your home mortgage. In less than five years your home mortgage will be paid off in full.

What does it mean to be "Upside down" , pertaining to financial

It means you owe more than the item is worth. Example you owe $80,000 on your house and it is only worth $50,000. Visa Versa would be "right side up" or owing $50,000 on the house and it is worth $80,000.