3631 Mortgage musing

Saturday, October 6, 2012

“With the enormous expansion of social programs in the 1960's and 1970's,

America waged war on poverty - and poverty won.”

-- Ray Wilson, in an Amazon reader review of Nickel and Dimed in America --

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First week of October.  One more day and then the October curse has passed for another year.

Jay and I  had learned to fear the first week of October.

• That's when his back went out, ultimately requiring surgery.  
• That's when he had the head-on collision that totaled the car and ended up with him being sued, lawyers and depositions and the whole shebang (his was the third of four accidents on that curve that evening before the county got around to sanding the curve).  
• That's when he had the first seizure, that led three months later to the brain cancer diagnosis.  
• That's when the first tumor recurrence showed up on an MRI.  
• And then the second.  
• That's when he woke up one morning with someone else's arm attached to him, the beginnings of the loss of the left side of his world.  
• And that's when he began his final decline from a devastated immune system.

For six years at least, every first week of October brought something bad.  For eleven years since, every fall, I hold my breath for a week.  Yeah, it seemed that the demons of October had it in for Jay, not me, but still....

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I don't understand interest rates.

I'd heard that it's difficult to get loans these days.  I hadn't been paying a lot of attention, but I did notice that the interest rates on my credit cards had been creeping up.   No, I don't miss payments, and I'm not late, and I almost always pay off the full balance every month, so the interest rates don't affect me that much anyway, but I killed one of my Visa accounts a few months ago when the interest rate suddenly went to 24% for no apparent reason.  That's ridiculous!  I didn't even bother calling them, except to kill the card.  My other cards hover around 7-9%, and when they creep up to 11% I call and complain and they drop it again.

So, I was under the impression that loan interest rates were high.

On the other hand, banks are paying ridiculous rates on savings.  I don't much think about what they're paying because my money isn't there to earn interest, it's just in savings as less accessible backup.  So yesterday I checked.  My savings accounts (four of them in three different banks) are paying .12% at one bank and .15% at another.  WHAT?!  That's less than a fifth of one per cent!  That's ridiculous!  I haven't bothered with CDs in decades, because they rarely pay even 1%.

So I wondered - if loan rates are high, and savings rates are low, why are the banks crying poverty?

Well, I checked on loan rates.

NJ current average mortgage rates:
3.33% - 30 Year Fixed
2.75% - 15 Year Fixed
2.68% - 5/1 ARM

WOW!

I consider that very low!

Of course, my last experience with a mortgage was when I left Ex#2 and bought the house in Highland, NY, in 1983.  I had a 1/3 downpayment on the house, financed the other 2/3, had an excellent credit history, and yet the best I could do was a 30-year adjustable-rate  mortgage at 16%, with 6 points!  Over the next few years the "adjustable" part took it up to a hair over 17% before it started down again.   90+% of my monthly payments went to interest, not principle.  So I have a horror of mortgages, and have avoided a mortgage on my last two houses since.

Sheesh.  At 2.75% it would make sense for me to take out a mortgage on the city house, invest most of the money in mutual funds (mine are paying 7% and up), and use the mortgage cash instead of credit cards - since I'd be paying like 6% less to use it.

It's not simple.  How much am I willing to pay for simplicity?
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