(302) 703-0727

(302) 703-0727

Prime Rate – What is it?

John Thomas July 21, 2007 Tags: , , , , ,

Prime Rate – What is It?

Prime Rate or Prime Lending Rate is the overnight lending rate that banks charge other banks to lend money.  It is based on the Federal Funds Rate.  Prime is typically about 3% above the Fed Funds Rate.  So if Bank A borrowers money from the Federal Reserve at 1% it will then lend to Bank B at 4%.  The 4% rate charged to bank B is the Prime Rate.

Wall Street Journal (WSJ) Prime Rate is a consensus measure of the Prime Lending Rate, and is published in the Wall Street Journal. The Wall Street Journal surveys the large banks and then publishes their consensus “Prime”, or the rate offered to clients who are considered eligible for “prime” financing terms. The Prime Lending Rate will move up or down in lock step with changes made by the Federal Reserve Board to their Fed Funds Rate.  The Prime Rate is an important index used by banks to set rates on many consumer loan products, such as credit cards, auto loans, and certain Adjustable Rate Mortgages. When the Prime is rising, variable interest rate loans and credit card rates will soon follow. Keep Reading...

Delaware Home Buyers Face Decisions that Affect Their Long-Term Financial Picture

John Thomas July 21, 2007 Tags:

Delaware Home Buyers Face Decisions that Affect their Long Term Financial Picture

Taking the step into home ownership is one of the most important financial decisions a person will make in their lifetime. There are many factors to consider when embarking on this venture. Literally hundreds of loan programs are available, and it is important to find the one that best fits your personal long-term goals.

First and foremost, you must have a certified mortgage planner in your corner that is willing to take the time to know what your long-term goals are. Communication is the key factor here. Curious prospective Delaware home buyers sometimes turn to Internet-based services just to see what current mortgage interest rates are. But a faceless web site will not take the prospect’s future financial planning into consideration or guide the potential borrower through the many nuances of the loan process. When shopping for a home loan, be wary of web-based services that offer programs to reel prospects in with attractive rates that are based upon unrealistic time frames. Keep Reading...

COSI Index & CODI Index – What are they?

John Thomas July 19, 2007 Tags: ,

COSI Index & CODI Index – What are They?

COSI Index
Cost of Savings Index (COSI)

A bank receives money from consumers in the form of deposits and then lends money as home mortgages or other loans. The interest rates in effect on these deposits are the basis for the COSI index. It is not based on actual interest paid, but rather the weighted annualized average of all interest rates in effect on deposit accounts on the last day of each month.

CODI Index

Certificates of Deposit Index (CODI)

Similar to the Cost of Savings Index above, this index is based on an average of the 12 most recent monthly yields on 3-month certificates of deposit (CDs). Keep Reading...

1 Year T-Bill – What is it?

John Thomas July 17, 2007 Tags: ,

1 Year T -Bill what is it?

One-Year/12-Month Constant Maturity Treasury (CMT)

This is an index published by the Federal Reserve Board based on the average yield of a range of Treasury securities, all adjusted to the equivalent of a one-year maturity. The US Treasury determines the yields on these securities by using the “daily yield curve”. The daily yield curve is based on the closing market-bid yields on actively traded Treasury securities in the over-the-counter market. This index tends to be volatile and responds quickly to changes in economic conditions. Keep Reading...

Mortgage Brokers – Proof that Less Costly Option for Sub-Prime Borrowers

John Thomas July 7, 2007 Tags:

Study Reveals Brokers Are Less Costly Option For Sub-Prime Borrowers
New Study Finds Factual Evidence That Consumers Pay Less With a Broker

Washington, DC. October 18, 2006  Brokers are a more cost-effective option for consumers in the subprime home loan market, according to a joint study released by economists at George Washington and Oklahoma State universities.

The study compared sub-prime loans originated by brokers and traditional lenders such as banks between 1995 and 2003. Its findings reveal that the reason brokers originate more than 50 percent of all residential loans is that they are a more efficient and cost-effective option for consumers. Keep Reading...

COFI Index – What is it?

John Thomas July 6, 2007 Tags:

Cost of Funds Index (COFI)

This is a monthly cost-of-funds index (COFI) reflecting the weighted-average interest rate paid by a particular Federal Home Loan Bank District savings institution on savings and checking accounts. The 11th District is the one most commonly used, which covers Arizona, California, and Nevada. The COFI index is published on the last day of the month and reflects the cost of funds for the prior month. COFI usually lags behind market interest rates in both up and down markets, which means that loans tied to this index rise and fall more slowly than interest rates in general. Keep Reading...

Real Estate Investing Seminar July 26th

John Thomas July 6, 2007 Tags:

Free Delaware Real Estate Investment Seminar on Thursday, July 26th from 6:30 PM to 8:30 PM at Primary Residential Mortgage’s Office in New Castle, DE.   The Seminar is for New Real Estate Investors. The seminar will show participates how to analyze potential investments, how to acquire the proper financing, what loan programs are available for investors with the current mortgage market and much more. Each participates will receive a Free Audio CD on Real Estate Investing and a Free Investors Kit which includes most forms needed to get started in Investing. Please Call 302-703-0727 and ask for John Thomas to register. The seminar will be at 42 Reads Way, New Castle, DE 19720. Keep Reading...

MTA Index – What is it?

John Thomas July 3, 2007 Tags:

MTA
Monthly Treasury Average (1 year MTA)

This index is determined by averaging one-year Treasury bills each month over the prior 12 month time period. This is an index used to set the cost of various variable-rate loans, particularly adjustable-rate mortgages. The use of the 1-Year MTA as a loan index is relatively new. The MTA generally fluctuates more than the 11th District Cost-of-Funds Index (COFI ­ see below), although they both track each other closely.

Note:
The MTA index is often used in what is commonly referred to as “Option ARMs”. This product type can create terrific cash flow and payment stability for your customer in the early years of the loan but requires education on the consequences of the different payment options, such as negative amortization. Keep Reading...