I’d like to talk to you today about an item of certain urgency. That would be if you’re thinking in terms of financing or refinancing a rental property, now would be the time to do it.
Featuring:
Bob Nelson, Eugene real estate investment broker
Bob Nelson: Interest rates are starting to jockey around. Now, when I say that, if you wanted to check the validity of that, follow the 10-year treasury. The rate that is offered on the 10-year treasury. That is an IOU sold by the government to investors who part with their money for a period of 10 years and receive a yield of a certain amount. The most recent reading that I saw, it was 2.63%, 2.63%. Typically the lender adds about 200 basis points or 2% of interest to that. That’s the portion that they will receive on that type of a loan.
Bob Nelson: If you see the 10-year treasury start to creep up, not only will the interest rate on borrowed funds for a mortgage on an income producing property go up, they don’t just go up that same amount as the increase in the 10-year treasury. The bank actually bumps it a little further with the concern this may be the start of a major increase, and they don’t want to be creating a loan that in hindsight is going to be an issue where they have loaned money at a rate that was less than what they reasonably should have expected. It’s an interesting process that there’s an urgency. If you’re thinking in terms of financing or refinancing an income producing property, do it now.
Bob Nelson: Things could get choppy and as they get choppy, it simply costs you more money. Not only though does it cost you more money, the willingness for the lender to loan for a period of time in excess of five years at a fixed interest rate starts to go down. We used to be able to borrow fixed interest for 10 years on an income property, and then the lenders now like to drop it down to a fixed interest rate for five years with a rate adjustment. Then once it’s been marked to market, it continues for the next five years. I’m Bob Nelson, real estate investment broker with Pacwest Real Estate Investments.
Join Eugene, Oregon, real estate experts: Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments, and Marcia Edwards, Residential Real Estate Broker with Windermere Real Estate, daily at 5:30 on KPNW for the “Real Estate Today” radio show.
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