Lower Rates should equal lower payments... right?

Lower Mortgage Rates should equate to lower payments... Right?

Being a math minor in college, and loving what I do, I like figuring out patterns and numbers and various similar items and patterns. One thing that always seem to shock me is how backwards things seem to work with our government.

On one hand they have attempted to help the economy get through these most difficult times by lowering rates (this is good). Helping to make things more affordable allows us all to have more disposable cash. That means more money for fun, savings and the reality's of unknowns in life. Then on the exact opposite side, of this appearance of help, they do the typical Washington thing and take away from the very same benefit they promoted via the media as being the helper for us all. Oddly this side does not get any of the press the first part does? Things that make you go hmmmm (props to C&C Music Factory)

So as rates are falling and homeowners are looking for additional ways to save and provide better for themselves and their families this is probably the question I hear and answer the MOST...

David - How can my rate be going down by over a full percent and my payment not changing or changing so little?

I then have to go into the full mathematics of the equation...

You simply have 2 components to your transaction 1st your balance x interest rate and term - simple and logical, however the 2nd piece is your balance and LTV x MIP factor (this is for your monthly mortgage insurance calculations for those who have less than 22% equity for FHA and 20% equity for conventional loans)

So its a nice thing to see rates low to help out borrowers who have stayed the test of time, paid their bills and want to take advantage of the lowest rates in history to save themselves and teir families money, as advertised. Then when they find out they don't have equity needed, to avoid mortgage insurance, as values have fallen dramatically, and the feds over doubled the cost of the monthly mortgage insurance on FHA insured loans they usually say "why do I feel that every time I turn around I am getting screwed by our government"? My reply is always the same... WE ARE!