Mortgages are a popular way to gather income for buying your first house, and are a great way to reduce your interest rates vs. taking out an unsecured loan, and it's important to keep an eye on mortgage rate trends, where to find the lowest mortgage rates, and so on, and mortgage rates in New Jersey are lower than they have been in a long time. However, there are some financial tips you need to learn in order to buy smart, so that you end up paying out as little as possible.
First, let's look at what a mortgage actually is. In simplest terms, a mortgage is a type of secured loan in which a buyer will borrow money, usually from a bank or mortgage broker, while using the house they plan to buy as collateral. You provide a set down payment (usually set at a certain percentage of the house's value), and the lender gives you a loan for the rest. This has the benefit of paying less interest than you would for an unsecured loan, as well as having a higher likelihood of approval - particularly if the value of the house you plan to buy is high.
The lender will then file a type of document called a Lien of Interest against your house. Basically, a Lien of Interest gives the lender the power to take away your house, forcing you to move out. (This is called foreclosure.) The house is then auctioned off to recover the principal. Principal is the amount of money that remains unpaid on the loan, minus interest. Interest is a type of finance charge assessed by the bank for the privilege of taking out the loan.
Mortgage rates are determined by
So how do you make sure you're getting more bang for your buck in New Jersey? Finding the answer to that question will require us to look at certain data. First is mortgage rates and property values within the state. As I said before, mortgage rates in New Jersey are the lowest they've been in many years. But let's take a look at some information to help us get a better overview. According to mlcalc.com, mortgage rates in Atlantic City are between around 4.3 to 4.7 percent (these figures are rounded to the nearest tenth of a percentage point), and according to Zillow.com, the average property value in Atlantic City is $132,500. That rate gets a little smaller in the Trenton area, with mortgage rates in that area reaching between 3.9 and 4.1 percent, with average property values around $84,300.
Next thing we must look at are what drives mortgages. Basically, mortgage rates are determined in small part by many factors, but the biggest player in whether mortgage rates go up or down is the 10-year Treasury Bond. What is the 10-year Treasury Bond? This is a bond that adjusts its value once every six months. The direction the bond moves is determined by the result of auctions run by the US Department of the Treasury. This auction sets the interest the bond accrues. If there is a high demand for treasury notes, the Department of the Treasury will sell these bonds to the highest bidder for more than face value, which decreases yields for investors, since the Government will only pay face value, plus the stated interest rate when investors sell these bonds.
Conversely, if there's not a lot of demand for these bonds, investors will not need to pay as much to buy the bonds, which increases yields. When yields increase, mortgage rates go up, and when yields decrease, mortgage rates drop. Over the course of the recession, the Government saw a great deal of demand for 10-year treasury notes with the slump of the economy.
Therefore, the dip in mortgage rates, combined with a slump in housing prices in New Jersey has created a golden opportunity for those who know what they're doing. With low housing prices and low mortgage rates, people are paying off their mortgages faster than ever before, and more people are considering investing in real estate.
New Jersey housing prices are quite low compared to other areas, so your chances of making money are drastically improved, if you know how to play the game, and now that the economy is improving, and housing prices are projected to increase slightly over the next year in many areas, you will likely get a nice return on your investment if you play your cards right.