Key Features
Tech Stack
But seriously, my favorite discovery when researching CU mortgages is the prevalence of the 15/15 ARM. It's fixed for 15 years, and then adjusts once. Most people refinance within 7 years, or move within 12. So it's like a 30Y fixed, but comes in at 20 basis points cheaper (0.2% lower APR).
Other than natural demand, Australia has a high real estate market due to the tax and a superannuation/pension distortions. Should try to fix those first. (probably impossible)
Let's put a number on it. Since the article uses $400k as a reference point, let's use that. You could afford to buy a $400k house back when you bought your current house. You cannot afford to buy a $400k house today. That would be true whether or not you had purchased your current house, and regardless of the interest rate on its mortgage if you had.
You only "can't afford to sell your house" if you're underwater on the mortgage and can't come up with the money to sell it.
We feel trapped because we would have to massively downgrade to move. Obviously, we COULD do that, but we don't want to.
You are right, we also couldn't afford to buy our current house if we currently didn't own a home, either. I am arguing that the fixed thirty year mortgages artificially drives up prices, which means that you are stuck and can't move whenever interest rates are high.
If we didn't have the fixed thirty year mortgages, housing prices would have never gotten so high, and buying and selling houses would be a lot easier, and people could move to where they want to be much easier.
Whether any specific person actually thinks through whether spending as much money as the bank will lend is prudent, instead of buying a house they can actually afford, saving the money, and upgrading later, is a different question. But it's not fair to blame the mortgage itself.
Anyone who ends up with their primary residence as their "biggest investment" has been a piss poor investor.
I have a really great rate on my mortgage, but our house is super expensive and small for our family… but now we can’t afford to move.
If we moved to a new house, we would have to pay off this great mortgage and get a new one, at a much higher interest rate. Even if we found a house that cost the exact same as ours, the monthly payment would be 50% higher, because current interest rates are more than twice what we have. We are locked into our house.
Edit: unless you mean that the downside of 30-year mortgages is you hardly get to pay off the principal in the first several years and don't build much equity maybe? That's more a "long mortgages" thing.
Think about what happens. My wife and I wanted to buy a house. Our budget is mostly around what we can afford as our monthly payment, just like everyone else. That means if interest rates are low, we can afford a much more expensive house (obviously). Ok, so we buy one with a payment we are comfortable with.
Now, rates go up. Say we need to move for a job, so we need a new house, and we still have the same budget. Well, that means the total cost of the house we can afford is much lower, because the higher interest rates means the total loan value must be much smaller to keep our monthly rate the same. If we were first time buyers, this is fine, because everyone is in the same boat; everyone has a smaller budget because monthly payments on the mortgage are higher, so housing prices should be lower. If that is the case, though, it means the house we are trying to sell won't sell for as much (because mortgages for house will cost people more), which means we would end up taking a loss on our mortgage (because even though our monthly payment is the same as the new loan, the total value of the old loan is a lot higher).
Of course, prices for houses don't move nearly as much when interest rates change as they should (relative to mortgage purchasing power). This is for many reasons, but part of it is because when rates are high, people (like me) don't want to sell their house and have to lose their really good mortgage, so fewer houses are on the market, which inflates prices. When rates go down, more people want to buy and sell houses, because they can both get more for their house they are selling and they can afford bigger mortgages on their new houses, which inflate prices.
Basically, this lack of mortgage liquidity works to keep housing prices high. When rates are high, no one wants to sell OR buy, and when rates are low, everyone wants to sell AND buy. Both result in prices being high.
30 year fixed mortgages are just a really weird financial product that has all sorts of market disrupting effects. You can pre-pay them whenever you want, so when rates are low, high rate loans are paid off and low rate loans replace them, but that means no one wants to sell their house and lose their great loan when rates are high. This means housing prices soar when rates are low, but don't come back down when rates are high. It creates a ratcheting effect on house prices, which is why so few people are able to buy houses.
This continues until the entire market collapses, like it did in 2007, and then the process repeats.
you would simply just keep it and rent it out and problem is solved. you get passive income + still own the house and have low rates.
OP didn't mean to say this, but yes, unfortunately they do. Anything that "increases affordability" will result in an eventual increase in the principal value for things that are supply constrained.
Now, there is a cycle of "rates go down, there is a flurry of re-finances and everyone locks in the lower rates and new buyers enter the market, and housing prices go up and up", and then rates go up, but housing prices don't go down because people can't afford to buy the houses at the same prices anymore, and so no one wants to sell (because the current owners are paying below market rates for their mortgage, so they face no selling pressure like they would if there WEREN'T long term fixed rate mortages), so there is no decrease in prices.
If you’re willing to have your current mortgage be more expensive to avoid the “downside of being locked into a low payment, you could just pretend your mortgage had adjusted and go buy a house that suits your needs better.
I can see how someone who decides to keep their current house to use as a rental and buy a new owner-occupied property would tend to increase house purchase prices slightly (but also increase rental availability and lower rent prices slightly).
The mortgage tax deduction is another thing that drives up home prices.
Sellers arent willing to lower prices AND lose a low rate and buyers aren't willing to pay those prices and expect a buyer's market.
Nothing is moving and realtors are hurting.
Something has to pop the bubble, will it be massive job loss that forces relocation or sale for cash and move to apartment?
Who knows?
"Won't somebody think of the realtors?" isn't one I've heard before.
You could also convert a 3% mortgage to a 5% for example. Because the owners of the 3% mortage aren't that interested in it any more, you could get that at perhaps as low as 80% (a former coworker got as low as 65%) of the original value. So if you buy a home for e.g. $200.000, you paid of $50.000 and "buy back" the rest at 80% you're now left with $120.000 of debt. You then get a new mortgage for that amount, and even at higher rate, that might result in a monthly saving. When the remaining amount is low enough, you could refinance and get e.g. a 10 year fixed rate mortage for a really low rate.
I don't know if you can do that in the US, but that's pretty much standard in Denmark. Most people will do that maybe 3 - 5 times during the lifetime of a mortgage. For the most part is make absolutely no sense, the bank just do some paper work, have you sign and then you owe less, but at a higher interest.
My first mortgage was a 2-year fix at 1.89% during covid. When that ended I had to remortgage at nearly 5%. That was a fun conversation with my partner.
The US system is genuinely unusual globally. Fannie Mae and Freddie Mac basically absorb all that interest rate risk that would otherwise sit with borrowers. It's a massive implicit subsidy that most Americans don't fully appreciate.
Where I live the condition vary widely. And basically the switching costs might easily dominate the total costs if you move/sell.
I've found that taking this into account it was better to trade a few places in term of interests for better conditions.
Patrick McKenzie (https://news.ycombinator.com/user?id=patio11) has a great deep dive on this: https://www.bitsaboutmoney.com/archive/mortgages-are-a-manuf...
Closing/switching costs are certainly a consideration still, but the "Truth in Lending Act" (TILA) made it easier to compare the all-in cost by providing a standardized APR number, which is what the dashboard focuses on.
The data table is based on https://svelte-headless-table.bryanmylee.com/
I found our credit union posts the mortgage rates clearly on a plain text like page. There's no BS and no games. Whereas with the big banks, you get the games and higher rates .. no matter if they have records of 10 years of your salary deposits. When I tried to suggest credit unions to friends, I got looks. Like, people just assume what everyone else does (get conned by big banks) is good.
But I've also noticed a stream of unrequested adoration towards credit unions, seemingly whenever any topic of personal banking pops up. A random person may simply lament about some fee their bank has charged, or the rate that their mortgage is financed at, or even mention in passing that they use a bank at all. That's normal-enough; people chat about whatever is on their mind all the time.
But quite often (too often?) upon the utterance of the word "bank," a whole cadre of people then immediately show up to sing a chorus (in unison) to remind them [and eachother] about how amazingly great credit unions are. Sometimes that cadre snowballs into a circus replete with a marching band, a dancing bear, and a trapeze artist.
"Oh, you still have a bank? Why aren't you in a credit union yet?"
"Yeah! Credit unions are awesome! People who don't use credit unions are just dumb or something!"
"Hey, guess what! My credit union even lets me access my money at 3:00AM the middle of the Mojave! These things are great!"
"Oh cool! The dancing bear is here again! I love that bear!"
---
The rather uniform predictability of this kind of spectacle can have a rather daunting appearance to someone who never asked for it.
And thus the apprehension may be explainable easily-enough with one word: Contrarianism. "This group of people is telling me I need to do this thing; therefore, I must not."
Or, perhaps with a cautious phrase: "If it sounds like it is too good to be true, then it probably is."
We spend a portion of our lives seeking to avoid scams and pitfalls. We aren't always successful at it ("there's a sucker born every minute"), but we still try to seek to avoid being a mark. When see a bunch of guys having a great time playing 3 Card Monte on the corner, we either learn to avoid them or we learn to lose our money.
When an unsolicited and eerily-coordinated group of cheering fans crawl out of the woodwork without deliberate provocation, it's justifiable and sane to turn around and run away. Especially when they haul out the dancing bear routine.
"The devil you know is better than the devil you don't know."
The American financial landscape is too diverse to accommodate such sweeping statements. To many depositors default to the big banks. But that doesn’t mean everyone—or even most—who are under optimizing their deposits is better served by a credit union.
> people imagine a scenario where they'll need to withdraw cash in the middle of the Mojave so they need WF
If ATM access is your bugaboo, an online bank that reimburses everyonea’ ATM fees is the way to go.
"You don't. They'll tell you."
I thought maybe you'd been hit by that update, but even more bummed to hear Google enshittification struck again.
> Then Google pushed their "Helpful Content Update" and...
May I just say, no matter what you work on, a separate piece of work will be getting people to know about it.
So fine, people can no longer find you on google. But if your website is truly useful, people will keep talking about it and linking to it, no?
Anyway, what are you working on now?
Consumers, for a product such as mortgage, will be fragmented and infrequent users, who will only be in-market for a mortgage for a ~3-6 month window every X years. For this audience, discoverability is what matters-- and they will simply go to a search engine and look for "cincinnati mortgages" for which Google will gladly show 8-12 ads with CPCs of $20. An objective ranking based on rates and fees is useful for the consumer, but not an ad network who would rather drive multiple clicks on paid ads. Being objective and useful isn't enough to play in the space, unfortunately.
Navy Federal has always had competitive rates: https://www.navyfederal.org/loans-cards/mortgage/mortgage-ra...
Membership requires a military connection in the family, but it can go back to grandparents: https://www.navyfederal.org/membership/eligibility.html
> Estimated monthly payment based on purchasing $400,000 home with 20% down, $567/mo taxes and insurance, and 1.65% closing costs.
Except maybe Texas, where else can you buy a house/apt in the US near a major job center for only 400k?
North side of Indy (Carmel, Fishers, Geist) is listed as one of the best places to live in the US.
Are you in CA, NY, or MA? I wonder if your scale is skewed.
[1]: https://fred.stlouisfed.org/series/MSPUS [2]: https://www.zillow.com/home-values/6915/san-antonio-tx/
Rank cities from most to least negative characterizations of their residents and/or politics on HN.
That'll approximately be your list.
NIGHT AND DAY DIFFERENCE. customer service is fantastic and their online banking app/website is no bullshit. It even supports TOTP 2FA, which I definitely wasn't expecting given that the huge bank I came from didn't for some reason.
Can't recommend a credit union enough.
Does anyone else think that the government should do something like this? Either enforce that vendors sends their offers to a central database which is publicly accessible, or at least make it available so the vendors can choose to send data there (maybe enforce it for big vendors, to get it started).
In general I think it makes sense for the government to be responsible for the market place, and the infrastructure around the market. The data should be avaliable publicly through a API so one could build different frontends and analysis services on it.
Example markets are electricity, deposits, mortgages, housing.
Ideas for monetization: Setup an automatic email alert if prices are changing for a given area and charge 5 USD per year per user.
Also you could extend this project and sell it later to one of the financial mags / publishers / websites.
I do not know about the US market: In the EU, mortgage markets are highly fragmented and its possible to live in one area and get a loan from a bank in another area
I went to a mortgage broker first who offered me worse tho not necessarily bad rates with other banks as an option. The 2 best options I found were not on his roster. The mortgage broker did say he preferred not taking insurance discounts as those insurance cost could go up up to a maximum and couldn't then be renegotiated separately. But so far it's been better for me and of course that broker would also have negotiated the separate insurance and gotten his cut.
This is the max allowed by banks but it's a huge risk compared to renting which is basically risk-free. Buying something less expensive to have a smaller debt ratio may be better than renting.
ps: comparing rates alone isn't fair because Europe has a lot more taxes
The rates are better, they're entirely local, and they're usually not trying to actively screw you.
Tit-for-tat, if you reduce it all down, the Chase's and Wells' should be able to offer the better terms based on their agreements with GSEs/secondary markets.
In reality, no one is getting the product at face value, so opportunities like this will exist, and you can take advantage of it like in these cases.
You and OP agree.
Broadly speaking, if you have good credit (or are wealthy) you’ll get a better rate at a bank or mortgage specialist. If you don’t, you’re more likely to get approved at a credit union.
Or you're buying well below your means but don't wanna get screwed into a different product because what you're buying is on the ragged edge of what can be bought with the lower cost mortgage product you want.
Some jerk at corporate for the big bank will punt because some rule he's supposed to follow says he ought to do that and it's not like he stands to benefit by not. The CU will probably squint and work with you.
This customer is looking for a lender who can and will eat costs for the relationship. That’s probably a mortgage specialist with a wealth management arm. The ones who require 25 to 35% down, but undercut the rates e.g. a credit union can charge.
> because what you're buying is on the ragged edge of what can be bought with the lower cost mortgage product you want
If you’re buying within your means, you shouldn’t be on the ragged edge of anything. You should be getting a cheap, plain mortgage from a lender competing for your business. Ideally conforming, and where the originator eats origination and closing costs.
And I can't put my finger quite on why, but your comment has a really not nice tone to it.
Are you referring to chrisBob? They aren’t the ones who made the “ragged edge” comment.
If you’re on the ragged edge of any financial product, you’re stretching something. If a customer is buying well within their means, they shouldn’t be pursuing—nor getting sold—a ragged edge product.
If, on the other hand, you’re doing a new build that isn’t optimized for resale, yeah, you may very well need to be on the ragged edge of a financial product. But I’d still evaluate that with scepticism if you aren’t financially stretching.
> they outnumber people who have any relevance to a "mortgage specialist with a wealth management arm"
Most home buyers don’t buy below their means. (They buy at or a bit above.)
Most home buyers should not be buying niche financial products, or optimising to be within tolerances of specific financial products.
Yup. The broadest categorization is are you first minimizing cost or chasing approval. If the latter, you’re better off with someone intensely local. If the former, you want economies of scale. (Of course, one should still shop around even if focusing on approval first.)
Nice
Not affiliated with Hacker News or Y Combinator. We simply enrich the public API with analytics.