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John F. O'Hara

John F. O'Hara
731 W Skippack Pike  Blue Bell  PA 19422
Phone:  610-277-4060
Office:  215-643-3200
Cell:  267-481-1786
Fax:  267-354-6973

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Refinancers to Save Combined $5 Billion in Interest in 2015

February 6, 2015 1:36 am

Borrowers are continuing to take advantage of near record low mortgage rates to lower their monthly payments, shorten their loan terms and choose the safety of long-term fixed-rate mortgages as they closed out 2014, according to an analysis by Freddie Mac. Borrowers who refinanced in 2014 will save on net approximately $5 billion in interest over the next 12 months.

"Our latest refinance report shows the refinance boom continued to wind down as the pool of potential borrowers declined over the course of 2014,” says Len Kiefer, Freddie Mac deputy chief economist. “However, because mortgage rates fell in the fourth quarter of last year, we actually saw the share of refinance originations tick up a bit despite volumes being down, a similar trend we expect to see for the first quarter of 2015 as mortgage rates have moved even lower. Lower mortgage rates, coupled with greater house prices appreciation last year, also brought about a larger share of borrowers cashing out home equity at the time of refinance.”

Freddie Mac’s report also revealed that of the borrowers who refinanced during the fourth quarter of 2014, 34 percent shortened their loan term, down from 35 percent from the previous quarter. Further, 35 percent of those who refinanced outside of HARP took out a shorter-term loan, while 33 percent of HARP borrowers shortened their term. Borrowers who kept the same term as the loan that they had paid off represented 60 percent and only six percent chose to lengthen their loan term.

Furthermore, about 71 percent of those who refinanced their first-lien home mortgage maintained about the same loan amount or lowered their principal balance by paying in additional money at the closing table. That's shy of the 88 percent peak during the second quarter of 2012. More than 95 percent of refinancing borrowers chose a fixed-rate loan. Fixed-rate loans were preferred regardless of what the original loan product had been. For example, 67 percent of borrowers who had a hybrid ARM refinanced into a fixed-rate loan during the fourth quarter. In contrast, only 4 percent of borrowers who had a fixed-rate loan chose an ARM.

The average interest rate reduction in the fourth quarter was about 1.3 percentage points – as avings of about 23 percent. On a $200,000 loan, that translates into saving about $2,500 in interest during the next 12 months. Homeowners who refinanced through HARP during the fourth quarter of 2014 benefited from an average rate reduction of 1.6 percentage points and will save an average of $3,300 in interest during the first 12 months, or about $275 every month.

Source: Freddie Mac

Published with permission from RISMedia.


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Fight Back against Financial Relationship Stressors

February 6, 2015 1:36 am

According to a recent survey by the National Foundation for Credit Counseling® (NFCC), disagreements over financial matters ranked highest on its list of relationship stressors. Disputes between couples about money management can begin as early as the first date, but they become detrimental to relationships if left unaddressed. As the years go by, what could have started as a constructive conversation about finance becomes a heated battle over who is right.

The survey also found that conflicts over financial infidelity, thriftiness and overspending can contribute to stress in a relationship. But no matter the challenges, “the best approach is to start communicating early,” says Bruce Clary, NFCC. “Understanding those differences means having honest discussions early in a relationship so the rules are mutually accepted and the financial goals are clear.”

Fight back against financial relationship stressors with these tips:
  • Be honest with yourself and each other when it comes to financial matters. As financial challenges appear, work together to address them directly instead of ignoring problems and wishing they will resolve themselves.
  • Establish money rules for the relationship and hold each other accountable. Discuss what will be jointly managed and set rules for making independent spending decisions.
  • Don’t conceal debt or sources of income from each other. Adhere to a policy of financial transparency to strengthen trust in the relationship.
  • Set a time and place where financial matters can be discussed on a regular basis, free of distractions.
  • Keep the tone of the conversation casual, and remain open to what each other has to say.
  • If a disagreement should go unresolved during a conversation, take a moment to find acceptable ways to compromise or consider revisiting the issue after a short time-out.
  • If a financial mistake is made, couples should work together to find solutions without assigning blame. Be willing to accept a fair share of the responsibility for the problem and the solution.
  • When tracking joint financial goals, understand that changing circumstances require a degree of flexibility from both partners in a relationship.
  • Understand that a single financial setback impacting one person ultimately affects the entire relationship, no matter how large or small the issue.
Source: NFCC

Published with permission from RISMedia.


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