How Much Would a Small Interest Rate Hike Affect Your Total Mortgage Costs?

Scissors_Cutting_MoneyThe world is watching and waiting to see whether the U.S. Federal Reserve will raise interest rates this month, or at least by the end of 2015.

A rise in the “federal funds rate” will translate pretty quickly into higher mortgage interest rates, affecting any prospective homebuyer who can’t simply pony up a few hundred thousand dollars in cash. (The fed isn’t the only driver of mortgage interest rates, but it’s a factor in the mix.)

Given that nearly a decade has passed since the fed raised this rate, most experts don’t believe it will do anything more than inch it up. This isn’t a time for shock strategies.

The prospect of a rise in the rate nevertheless raises a question for prospective homebuyers. How much would a small rise in mortgage interest rates affect the amount you ultimately pay for your mortgage (assuming you choose a fixed-rate loan)?

The answer can be found by having some fun with Nolo’s “How much will my fixed rate mortgage payment be?” calculator.

Let’s assume you’re buying a $500,000 home, putting 20% down ($100,000, ouch) and will therefore be taking out a $400,000 mortgage. The reported 30-year rate on today is 3.96%.

According to Nolo’s calculator, your monthly payment on this loan would be $1,900, and the total interest you’d pay over the life of the loan would be $284,161.

Now let’s assume interest rates go up a notch, to 4%. That would take your monthly payments to $1,910 and your total interest paid by the end of the loan term to $287,478 — $3,317 more than you would have owed in our first example. Not awful, over 30 years.

Let’s keep going, and take those interest rates up to 4.5%. (Could happen!) That would boost your monthly payments to $2,027 and your total interest paid by the end of the loan term to $329,627. Things are starting to look more serious.

What about 5% mortgage rates? They’re still within the realm of where experts predict rates might go in the coming months or year. A mortgage at 5% on your $400,000 loan would come with monthly payments of $2,147 and bring your total interest paid to $373,021.

Them’s real dollars. With a seemingly small rise interest rate on the day you close on your home, from just below 4% to 5%, you’d be looking at owing $88,860 more in total interest by the time you’d paid that loan off.

Of course, if housing prices were to go down as a result of the rate hike, that would offset part of the problem – but no one seems to think they will.

Now might be a good time to get serious about buying a home. A trusted mortgage broker can also help you think strategically about how to finance your purchase.

DOJ’s New “Stingray” Policy Offers Protections, Limitations

iStock_000066456711_SmallLast year, the U.S. Supreme Court decided that police officers generally need warrants to search the cellphones of people they arrest. Earlier this summer, a federal court disagreed with some of its counterparts by holding that the government must typically get a warrant to inspect someone’s past cellphone location information. Now, in the latest example of the law scrambling to keep up with mobile phone technology, the Department of Justice (DOJ) has announced a policy on cell tracking devices.

The policy, unveiled last week, generally requires that officers get warrants before using “stingrays,” and that they let judges know when they intend to use the equipment.

Stingrays are suitcase-sized devices that mimic cell towers. By tricking cellphones into connecting with them, they reveal the phones’ whereabouts. But these trackers, which are strong enough to pass through walls and can interfere with calls, don’t connect with just one phone—they link up with all phones in the area. And they can grab not only location information, but also data like texts and emails. (The DOJ says the technology federal agencies use won’t capture this kind of material.)

Added Protection

The DOJ policy mandates that authorities regularly delete data they collect through stingrays. For instance, agents must erase it once they locate a suspect’s phone. If they don’t locate the phone, they must delete all data they’ve gathered at least once a day. But they’re actually supposed to hang on to some data, namely, the kind that could help prove a suspect’s innocence.

Exceptions—and Limitations

Like any rule, the DOJ policy has exceptions. First, officers may use stingrays without warrants in “exigent circumstances,” as where someone’s life is in immediate danger or someone is about to destroy evidence. Second, they can skip warrant requests in the face of the more ambiguous “exceptional circumstances.” These are situations “where the law does not require a search warrant and circumstances make obtaining a search warrant impracticable.” (DOJ Press Release.)

Newsweek reports that an example of “exceptional circumstances” is the FBI’s use of stingrays without warrants in public places, where the agency considers folks to lack reasonable expectations of privacy. The DOJ is quick to remind, however, that to invoke the exception, obtaining a warrant must be “impracticable.” Plus, the department notes that agents claiming exceptional circumstances will have to get both a court order and approval from agency higher-ups. But many contend that this kind of court order is remarkably easy to obtain; a warrant, on the other hand, demands the higher showing of probable cause.

Perhaps the biggest “exception” to the fresh stingray approach is really a limitation—it’s the fact that the policy doesn’t reach state or local law enforcement (though some states do require warrants for stingray use.) So, while federal bodies like the FBI, the Drug Enforcement Agency, and the Marshals Service might have to abide by these new rules for investigations within the U.S., your local police department won’t. And that’s no trivial distinction: The Washington Post reports that at least 53 agencies at the state or local level have bought stingrays.


Recent word from IRS Field attorneys suggests that improper disclosures on a gift tax return equates to an indefinite period of limitations, rather than the usual three years.  Failure of a taxpayer to properly disclose gifts (transfer of interests in two partnerships) to his daughter, including the identity of one of the partnerships, and failure to provide an adequate description of the valuation methodology tripped up the taxpayer in question.

A transfer will be considered adequately disclosed only when:

  • The transferred property is described and any consideration received by the transferor is disclosed;
  • IRS is apprised of the identity of, and any relationship between, the transferor and each transferee;
  • The tax identification number of any property transferred in trust is disclosed, as well as a brief description of the trust terms is provided;
  • A detailed description of the method used to determine the fair market value of property transferred is properly disclosed; and
  • A statement describing any position taken that is contrary to any proposed, temporary or final Treasury regulation or revenue ruling is attached.


Folks who may still be pondering what they did in their 2011 Federal income tax return, and whether it was right or not, or maybe even questionable, though now looking like there’s room for interpretation in their favor, had better get on the ball.

The statute of limitations on the 2011 tax year (for folks who extended their returns that year until October 15, 2012) will expire come this October 15, 2015.  So if you think you may need or want to file that 1040X (amended individual return) you had better get on the ball right away!

Sad That Summer’s Ending? At Least Home Burglaries Should Go Down!

BurglarI just came across an interesting report from the U.S. Department of Justice, indicating that the rate of home burglaries is significantly and consistently higher in summer than in the other three seasons of the year.

The report didn’t explain the reasons, but we can easily guess: Many homeowners take vacations during summer and leave their homes empty for days or weeks at a time; more people are typically out on the street during summer, providing cover for burglars hanging around to watch patterns of activity in the neighborhood; and, of course, no sensible burglar wants to, say, climb a ladder into a house during a rainstorm, or leave footprints in the snow.

Fortunately, Nolo has a number of helpful articles on how to protect your property from burglary, including:

You’ll especially want to read these if you’re planning any late-summer vacations! (Have a lovely trip.)