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Regulatory loophole in qualification could lead to future market weakness

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Ephraim Vecina | 04 Jul 2016, 08:15 AM Agree 0
In the near future, current mortgage qualification rules might complicate the already inflamed rate of growth in household debt, warns an analyst
  • P. Edwards | 04 Jul 2016, 10:43 AM Agree 0
    Am I missing something here? Mr. Ross states that a 1% increase in mortgage rates from 2.8% to 3.8% results in a 40% payment increase. Based upon a $100,000 mortgage, a 2.8% rate results in a payment of $463.04 on a 25 year amortization. A 3.8% rate results in a payment of $515.23, an 11.3% increase. The same percentage increase would result with any mortgage amount. What numbers is he using for the 40% increase?
  • Andrew | 04 Jul 2016, 11:13 AM Agree 0
    It's actually even less then 11.3% as you have a 5-year fixed mortgage at 2.8%, at the end of which the rate would go up to, say 3.8%. But now you have a term left over of 20 years, and with the principal remaining of around $85k as per above numbers the payments will be recalculated to $505/mo or around 9% higher payments then original. Nowehere near the 40% the author writes.
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