Second home mortgage interest rates

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If you are considering buying a second home, lenders will look closely at your to account for two mortgage payments. Understanding your debt, and how to impact your debt-to-income ratio, can help make you an informed second-home buyer with a strong game plan.

Your debt-to-income (DTI) ratio

When you apply for your second home loan, lenders review how much debt you would pay every month if you added another mortgage. Lenders look at your existing debt payments, plus the new projected mortgage payment for a second home, and calculate what percentage that represents of your total pre-tax income. This percentage is your debt-to-income ratio, which is one of the factors lenders use to decide whether or not to extend a loan.

Lenders often want your debt to be no more than 36% of your monthly pre-tax income; and you’ll have to accommodate both home payments within this percentage. If you can’t afford both mortgage payments (plus taxes and insurance, etc.) and keep within that maximum 36% ratio, you may want to reduce your debt or consider a lower loan amount.

How to calculate your debt-to-income ratio (DTI)

When you apply for a home loan, lenders calculate your debt-to-income ratio by using these steps:

  1. Add up the amount you pay each month for debt and recurring financial obligations (such as credit cards, car loans and leases, or student loans but not monthly expenses like electric or phone bills). Be sure to include your existing mortgage payment (including property taxes and insurance) in this number.
  2. Add your projected additional monthly mortgage payment to your debt total from step 1.
  3. Divide that total number by your monthly pre-tax income. The resulting percentage is your debt-to-income ratio.

For example, if your monthly income is $5, 000 and your monthly debts plus your monthly projected mortgage payment are $1, 000, your debt-to-income ratio would be 20%.

How to lower your debt-to-income ratio

If your DTI ratio is too high, consider how you can lower it. You might be able to pay down your credit cards or reduce other monthly debts. You may also want to increase the amount of your down payment to lower the projected monthly mortgage payment, or you may want to consider a less expensive home.

You could also consider whether refinancing your current home to pay off other loans and debts could be an option for you. Refinancing is a big step, and it’s not something you should do if you’re planning to sell your home within the next 6 to 12 months or so. But you may be able to pay down higher interest rate debts by rolling them into a lower-interest rate home loan. This could affect your debt-to-income ratio by lowering your monthly debt payments, or enabling you to pay off your debt more aggressively, or both. But this strategy requires careful consideration before you can really know if it’s the right choice for you—and the financial discipline to not run up the higher interest rate debts again once they’ve been consolidated.

The mortgage interest deduction

2005-10-13 19:50:10 by storeez

Not sure who all this proposal is going to affect in here, but Bush's advisors have suggested that the current 1 million dollar ceiling be dropped to about $350,000.
What this effectively means is that if your mortgage is $350,000, you still get all your deductions. But if it is 600,000, you get to deduct only the interest paid on the first $300,000. This means an increase in tax liability of major proportions for those who have large mortgages.
On the west coast here, in the Bay Area, the average home price for a place most would feel OK living in is over $600,000. Now. If this proposal goes through, even with fairly low interest rates, the people who otherwise could afford to buy no longer can do so

Can you find another 10% investment?

2013-05-18 14:31:38 by bobrogve

I'd like to get in on it.
What's the home price to median income ratio in your area?
One caveat is that the Fed is now making noises about ending QE. I don't know how much longer they'll keep interest rates low after that. They have promised not to raise rates until unemployment improves, but Bernanke will be gone next year. The new chair may be a dove too, but it's a risk nonetheless.
Interest rate hikes will depress home (and bond) prices, all else being equal

Here's better reason & does anyone long for JFK

2008-03-17 12:55:14 by LivaLittle

And the way reporters ignored his affairs? Ditto FDR and Dwight Eisenhower. Today's tabloid-ish snoopery into one's sex life needs a return to the days and ways of old.
Now, actual reasons Spitzer was outted so thoroughly:
Since Bush came to power, a new species of loan became the norm, the ‘sub-prime’ mortgage and its variants including loans with teeny “introductory” interest rates. From out of nowhere, a company called ‘Countrywide’ became America’s top mortgage lender, accounting for one in five home loans, a large chunk of these ‘sub-prime

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Sun City evolution: Remaking a community  — Arizona Republic
Gary and Deanna Junso purchased a $200,000 house in Sun City in 2011. The couple, in their mid-60s, now start their annual three-day drive from South Dakota to their winter home the day after Thanksgiving.

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