How Much Can I Make, Mortgage Rates Low, 1.99%

In this solo episode, Jason Hartman talks about mortgage interest rates. He discusses the announcement from United Wholesale Mortgage (UWM) about a loan program that offers mortgage rates as low as 1.99% and shares strategies to take advantage of this low-interest rate.

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Welcome to the American monetary associations podcast where we explore how monetary policy impacts the real lives of real people. And the action steps necessary to preserve wealth and enhance one’s lifestyle.

Jason Hartman 0:29
You know, I talked to you recently about how the rent to value ratio has been temporarily repealed. And this really illustrates it because all of those fools, all of those people misleading us out there in the media, talking about the impending doom and the housing crash. And I get it, the economy is not in good shape in many parts of it. But again, very lumpy, very uneven. Well, let’s just look at housing, the one part of the economy outside of food, and I guess clothing, but I’m sure everybody’s got more than enough clothing. Clothing has gotten so cheap, it’s absolutely crazy housing that has universal need. Remember, people need food, clothing, and shelter? Well, let’s compare some mortgage rates for a moment. Why don’t we do that? Why don’t we do that, because this will be very enlightening, before we get to our guest today. So united wholesale mortgage announced today that it was rolling out a loan program that offers borrowers mortgage rates as low as 1.99%. That’s 1.99%. Now, on July 31, the same company announced that they would do 1.875% on a 15 year mortgage. So the 1.99 is on a 30 year mortgage, this will be in very limited supply, I’m sure this money will be gobbled up, like there’s no tomorrow, remember, money is just like any popular product, when it’s super cheap, and it’s a bargain, it’s going to be a bit of a hassle to get it, you’re gonna have to wait in line, you’re gonna have to put up with bad service. That’s the way it goes. Now, mind you, these are owner occupied mortgage rates, these are not investor interest rates, investors will be dinged a little bit and have to pay a little more. But again, it’s a sign that the overall mortgage market that mortgage money, even if it is non owner occupied, in other words, investor financing, it’s still incredibly cheap, because these two track each other. Unfortunately, there’s not really any index, at least not that I’m aware of that shows investor mortgage rates, non owner occupied one to four unit considered residential mortgage rates over any long period of time. So you just have to assume that, you know, as an investor, whatever the owner occupied mortgage rate is, you’re going to pay a little more, how’s that for an exact science a little more, a little more, you pay a little more. Okay, pay a little more.

So here is the comparison I want you to make. And by the way, this mortgage is available to people get this, maybe we are revisiting the crazy loans or to liberal times that we had back in the early 2000s. Because you only I thought the requirements for this ultra cheap money would be so difficult that only a few small number of very premium, borrowers wouldn’t be eligible. But that’s not the case. Because get this, you only have to have a FICO score of at least the article says at least 640. That’s ridiculous. 640 isn’t even a very good FICO score at all. Remember, the ideal FICO score is 720. And of course it goes higher, you could have a 740 plus FICO score, you could be in the eight hundreds. But just remember what I’ve taught you over the years. If your FIFO score is too high, it’s just like having a bunch of money stuck under your mattress. It means that you’re not using your credit. So when people come to me and brag about, oh, their final score is 800. I say, oh you dummy. You need to be using more of your credit. Apparently you like sticking your FICO score under the mattress where it doesn’t do anything for you or it doesn’t earn you any return on your investment. No, you don’t want your FICO score to be too high. Now in reality Though, what happens when you start buying a bunch of properties? Your credit does take a little bit of a hit, and it goes down at first. But then later after you’ve made those mortgage payments consistently, six months, 12 months, a few years, you know, I don’t have the exact information here. I’m not, I mean, this stuff is super complex, okay, there’s, there are people that spend their whole careers engaged in optimizing FICO scores. And guess what, I’m not one of them. But just in principle, that’s the way it works. So your credit score really will go nice and high. I don’t know if it’ll be higher than if you’ve never used your credit. But it’ll go up for sure. I it’ll take an initial hit. And then after repayment, on time, for a period of time, you’re gonna see that FICO score rise very nicely, very nicely.

So get this, here’s the comparison. And this is really important, folks. Really a morning, listen up, are you listening? This is really important. You always see these people in the media, you always hear these idiots talk about the housing market. And they say, Well, you know, prices now are as high as or higher than or whatever they’re gonna say, are almost as high as because of course, it depends what markets they’re talking about this, that and the other thing you you know, peel the onion them 1000 different ways fine. But in principle, if you just look at the nationwide median price home, right, on a very simplistic view of things, they’re gonna say, well, housing prices now are really high. And when they were really high before we went into a bubble, and the market crash, okay, fine and dandy. Good for you, you can look at a price chart, but you never look at what the cost of the house is, you only look at the price of the house. So this will be similar to if, for example, if in the past just that it didn’t happen this way. But let’s just make a comparison here. Say for example, in the old days, when housing crash before, you could only get a 10 year mortgage. Okay, just humor me for a moment as an example, the mortgage was amortized, meaning you pay principal and interest and you are mort the loan you kill it. When you make the last payment. Latin word a morte means to kill, okay to kill the mortgage, you amortize it away, you kill it slowly, over 10 years instead of 30 years. Right? So say for example, back then you could only get a 10 year loan. And now you can get a 30 year loan. Well, what does that do? It makes your cost every month much lower.

So let’s view that as a concept for a moment and put that on the shelf. Now that we’ve got it in our head, okay, in 2006, the mortgage rate averaged 6.41% in 2006. So if you financed a $100,000 mortgage Now remember, I’m talking here not about the price of the property, I’m talking about the amount of the loan, the mortgage amount, in 2006, you paid 6.41%, and you got a $100,000, mortgage, your payment, amortizing it over 30 years. Everything else I’m going to keep it totally consistent, would have been $626.16 per month. Okay. I’m gonna leave the sense out, because a lot of people have no sense. Oh, I’m so funny. These people in the media have no sense. They make these completely inaccurate, misleading comparisons that mislead you to miss opportunities, or mislead you to do things you shouldn’t do or avoid doing things that you shouldn’t be doing. Right? It’s totally misleading, to be misled. Okay. I’m done with that. I got my trusty HP 12 c calculator in front of me. You can go and you know, cheat. Just type in amortization calculator and search it on the web, as you bring it or DuckDuckGo it because you wouldn’t dare Google it. So type in an amortization calculator and you do the math yourself. Because when you do it yourself and you really see it, you know, you own it. You believe it. But here’s me on my good old fashioned HP 12 c calculator. For those of you don’t know what that is, as people as old timers in the old days, this was the standard calculator that everybody use, and you can still buy them today because so many people, the dying breed like myself, we will eventually All die off. Hopefully it won’t be soon. But we still like this good old calculator, you know, you just get used to something and you keep using it. It’s a great calculator. It’s a truly incredible thing. In fact, the ads in the magazine, when there used to be these things called magazines, there would be an ad you’d see in like the realtor magazine, and would have a picture of the HP 12 c calculator that was about $110. Now adjusted for inflation today that’s about, I don’t know, 300. And something dollars, probably, I bought my first HP 12 C, when I was 18 years old, and I paid like $110 $116, or something like that. It’s the calculator, the ad would say the calculator that has no equal, because it’s sort of backwards, there’s no equal sign on it. Every other calculator has an equal sign except this one no equal anyway. So I type in $100,000. And then I go PV for present value, because that’s the present value of the mortgage, not the future value. And then I type in 6.41, blue key I meaning interest rate, and then I type in three, zero blue key n, meaning number of payments, 30 years, and I get $626. I’m gonna drop the cents, okay, now, I do the same thing, at today’s interest rate at this ridiculously low absurd negative interest rate 1.99%. And the same $100,000 mortgage amount is $369 per month. So you would pay in 2006, at what many consider to be the peak of the market, you would pay $626 per month, you can borrow the same amount of money today, for $369. So you save almost $300. Now, it’s fair to look at this a different way. Let’s look at it another way.

So the question is, how much has our buying power increased? In other words, apples to apples comparison? How much more? Could we spend on a house today to have the exact same payment? But wait a second? Even if we make that calculation, which we’re about to it won’t give us the complete picture? Well, it? Why not? You regular listeners that have been following my work for the past 1617 years? You know the answer to that question, don’t you? The answer to the question is, but I haven’t adjusted for inflation. There’s no inflation adjustment here. This are just nominal dollars. Nominal, of course means in name only see in 2006 $626 was called the same thing. It’s called today. So in name only. That’s all I’m comparing today. I didn’t adjust this for inflation. And you know what, if I have a few minutes, might take more than a few minutes to do it. Right. I will do that math for you. And I’ll bring it to you tomorrow. How’s that sound? cocoa. Just remember, I gotta adjust these numbers for inflation. But Coco Guess what? My dog is looking at me so weird right now. She thinks I’m loony. That’s the dog, Coco. Alright, I’m just gonna adjust them for you should see this right now, folks, if only we were on video, and you could see the dog looking at me right now. It’s pretty funny. Cocoa. We’re not only going to adjust for inflation with the official statistics, we’re going to go and log into my private membership of shadow stats calm, and we’re going to adjust for the formerly official inflation numbers.

Folks, I have something to tell you right now. The dog is walking upstairs. She’s walking away. She my dog thinks I’m a Looney tune. Okay, maybe I am. But I want to know what our buying power is. Everything else being equal. So guess what? Instead of looking at a $100,000 mortgage, I went ahead, and I just guessed roughly, I said what if I got a mortgage for $70,000 more? Now remember, this is not the property price. It’s the loan amount. So say I decided to spend $70,000 more for a property today. Then in 2006. How would that look? Well, all things being equal 2006 nothing here is adjusted for inflation. Okay, but that payment at 6.41% interest which was the rate in 2006 Wouldn’t be 1000 in $64. But today, at 1.99%, if you can get one of these fantastic loans, I can spend $70,000 more. In other words, 70%, more, seven 0% more. Okay, the $100,000 mortgage is now $170,000. And my payment would be pretty much the same. To be specific, I would pay for $70,000 in additional price or mortgage loan amount, I would pay $627.50 versus getting $70,000, less, 14 years ago, would be $626.16. So yeah, it’s a buck 30 give or take right difference $1.30 a month difference. So I get an additional $70,000 or 70%. Look, folks, you can just add a zero if you want. If you live in the Socialist Republic of Los Angeles or San Francisco, just make it a million dollar mortgage, and a $1.7 million mortgage, and it’s the same thing. You just add a zero, it’s the same proportion, okay, I can get $70,000 additional buying power today, for the same nominal dollar price. But wait, there’s more, it gets better. Because when we adjust for inflation, we’re going to do some more math, even though the dog walked away, and she didn’t want to hear me talking about this. I tell you, I’m gonna do a little more analysis for you and get back to you on this.

So stay tuned, stay tuned for more, because this is really, really exciting, folks. And this is how to look at the reality of the situation. The reality of the situation is here for you. So very interesting. Again, 70,000 bucks extra. Thank you, Jerome Powell for that extra $70,000. See, Jerome Powell didn’t have to send you $70,000. All he had to do is lower the interest rate. And you got effectively $70,000. Now, you want to know why wealth inequality is growing? Because guess what, some people will never get that bailout. Most of you listening will get that bailout. You know, we’ll take advantage of it. But guess what? The poor, they’re not buying a house, they’re not getting a mortgage, they’re not getting an additional $70,000. You see how this is unfair? It is. But what can we do about it? I don’t know. Probably nothing. But the best way to help the poor as the saying goes, is not to be one of them. Okay, so, so go make yourself some money with this additional 70,000 bucks. Jerome Powell uncle Jerome just gave you and take advantage of it. And in fact, take advantage of it 10 times and he just gave you $700,000 take advantage of it 20 times and he gave you $1.4 million. Take advantage of it. I think you can do the math. I don’t need to multiply for you. Do I? Okay. Okay, one more time. Take advantage of it three times. And he gave you $2.1 million. Uncle Jerome Powell, your rich uncle. What a guy what a guy. And if we adjust for inflation, it’s even better than that.

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