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Here Comes Good News in a Bad Economy

Mortgage interest rates reach record lows at First Hawaiian Bank


If you’re in the market to buy anything right now, you’ve probably found that the only thing good about the bad economy is that just about everything is on sale, including mortgage interest rates.

Last week’s rates at First Hawaiian Bank hit new 50-year lows, according to senior vice president Wes Young, bringing a 30-year, fixed-rate mortgage down to 3.875 percent with 2 points.

“Back in 2000, our 30-year rates were around 8.5 percent,” says Young. “What triggered rates going down was 9/11. The government was looking for ways to stimulate the economy. And in 2002, rates dropped below 6 percent.”

In 2003, rates fell to just under 5 percent for a couple of days, and have been teetering between 5 and 6 percent for several years. After the third quarter stock market crash in October 2008, the feds stepped in to stimulate the economy. They enacted a program as part of the Federal Housing & Economic Recovery Act of 2008 to keep mortgage interest rates artificially low by purchasing mortgage-backed securities. The program QE2 was intended to do the same, but all government intervention ended in June, and the fate of mortgage rates was put back into the hands of more traditional indexes, such as the 10-year Treasury bills.

What does this mean to homebuyers?

“What matters most about buying a home is not how much the seller is asking for the home, but how much your payments will be each month,” says Young. “If you look at interest rates from 2005 to now, even if prices haven’t come down much, the monthly payment associated with buying a home has.”

Compared to mortgage interest rates in 2000, monthly payments on a $400,000 loan amount vary significantly.

A $400,000, 30-year fixedrate mortgage at 8 percent would mean a principal and interest payment of $2,935. At 5.5 percent, payments would be $2,271. And at today’s low rate of 3.875, your payment is $1,881 a month.

The record low rates make it an optimum time to refinance your home as well. As there is no one-size-fits-all rule for refinancing, Young suggests you talk to a personal banker at First Hawaiian Bank first. If your loan amount is small, for example, and you only save $50 a month by refinancing, it may take too long to recoup the closing costs associated with a refi.

“Come in to talk with one of our personal bankers, and they can run the numbers for you,” says Young. “Low rates have created a refi frenzy. But it may not be the right move for some. Our slogan is, ‘Yes We Care.’ We’ll take a look at your overall financial situation.”

And here is some great news for those homeowners who have already paid on their mortgage for seven or eight years: First Hawaiian Bank can refinance your loan with a shorter amortization, so you don’t have to reset the clock back 30 years.

To qualify for today’s lowest rates, Young says you must have a credit score of at least 740 and a loan-to-value of at least 75 percent, meaning your loan amount should be 75 percent or less of the appraised value. Lower credit scores, or a higher loan-tovalue will have add-ons to the fees and could bump up the rate.

The 3.875 rate is quoted with 2 points. Points are a way to buy your interest rate. One point is equal to 1 percent of the mortgage loan amount. With only 1 point, the interest rate is 4.125, and with no points the rate this week is 4.25.

Finally, Young offers this bit of advice: “Keep debts, as well as credit cards and car payments to a minimum, as these can affect cash flow and qualification rates as well.”

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