Connecticut Mortgage Rates and Real
Connecticut is a popular place to live
among the New England region of the US. With its high per capita income,
close proximity to well paying jobs in New York City, and low taxes
compared to the other states in the region, Connecticut has made a name
for itself as a great place to call home. Known as the “Constitution
State” or “Nutmeg State,” Connecticut’s residents are most densely
populated along the southwest corner of the state, so as to easily live,
work, and commute within the Tri-state area.
Connecticut Real Estate Prices Compared
to National Average
There is a broad range of real estate
prices throughout the state of Connecticut with prices lowering as you
go further to the central and eastern parts of the state. With Bridgeport’s
median prices around $374,000, Hartford’s of $226,000, and the Norwich-New
London area around $209,000, there are many different real estate options
throughout Connecticut to meet a buyers needs. On the whole, the median
price for a home in Connecticut of $238,900 is much higher than the
national average of $172,000. This is due to the many hedge funds based
out of Greenwich and the upper income Connecticut commuters who work
in NYC. Their presence has helped Connecticut to have the second highest
number of million dollar homes after California and skewed median home
prices to much higher levels.
Popular Cities in Connecticut
- Bridgeport (138,000):
As the most populated city
in Connecticut, Bridgeport is known as the “Park City,” and is located
along the Long Island Sound. It boasts itself as the birthplace of the
Frisbee and one-time home of P.T. Barnum, the world famous circus promoter.
- Hartford (124,512):
Known as the “Insurance
Capital of the World,” Hartford is also the state capital of
Connecticut and its second largest city. Recently, Hartford has seen
a resurgence of development around its downtown area and along the riverfront.
- New Haven (124,000): Third in population, though
nearly identical to Hartford, New Haven is home to Yale University,
one of the largest employers in the state. In addition, New Haven has
one of the highest per capita incomes in the nation.
Fastest Growing Cities in Connecticut
Stamford, Norwalk, and Danbury have
shown themselves to be a few of the fastest growing Connecticut cities
due to their low cost of living in relation to the surrounding Connecticut
areas that are within commuting distance to New York City. Each is part
of Fairfield County, which has one of highest per capita income levels
of any county in the US.
Connecticut Mortgage and Foreclosure
Connecticut is a state that uses “lien
theory” when it comes to lending and real estate. This means
that the property is used for security against the loan, and that the
lender has a lien on the title of the property until the loan has been
paid off in full. In Connecticut, the type of document used to place
the lien on the property is called a mortgage.
Unique to Connecticut is that the mortgage
documents create a similar legal setup as a deed of trust, with legal
title to the property being held by the lender, and equitable title
going to the person receiving the loan, which is also referred to as
the equity of redemption. This legal arrangement is more common with
“title theory” states that don’t require foreclosures by
judicial review. Whereas, Connecticut does require a judicial foreclosure
process before the home can be sold or turned over to the lender.
Connecticut Foreclosure Process
There are two different judicial foreclosure
processes in Connecticut. They are known as “strict foreclosure”
and “foreclosure by sale.” The judge will decide which is used depending
on the equity of the home in question. Foreclosure begins when the lender
records a lis pendens, which puts a cloud on the title of the property.
All parties with an interest in the home must be given 12 days notice
of the complaint before a claim is filed with the court and a trial
date is set. The judge will determine the type of foreclosure process
at the trial.
- Judgment of Strict Foreclosure: In strict foreclosure, no sale
of the property is held to pay off the loan balance. This process is
usually chosen when the property has little to no equity above the loan
amount owed. The judge will give what is called a law date, which is
the date when the borrower must pay off the loan or lose their interest
in the home. This is the only redemption period for the borrower. If
they are not able to pay by the law date, the ownership of the property
is automatically changed to the lender.
- Judgment of Foreclosure
When the property has equity above
the amount owed to the lending company, or is in foreclosure due to
a federal lien, the judge will make a judgment of foreclosure by sale,
which means that a date will be set to sell the home, and the proceeds
will be used to pay back the loan. The redemption period for the borrower
will be determined by the judge and can be expanded due to hardship.
It takes 30 days from the sale of the home for the courts to approve
a Confirmation of Sale. This will end the redemption period for the
original borrower and transfer title to the new owner.
- Deficiency Judgments: Connecticut allows recourse by
the lenders to sue for money not paid back during the foreclosure process.
In a strict foreclosure, the lender can sue for the amount above the
appraisal value of the home if it is less than the loan amount owed.
If the home is sold in a foreclosure by sale and the proceeds do not
cover the total amount owed, then the lender can sue for a deficiency
judgment for the remaining money they are due.
Connecticut Interest Rates
When compared to the national average,
Connecticut interest rates will appear higher than the norm. This is
due to the large number of homes that cost over a million dollars and
require jumbo loans to finance. Jumbo loans carry higher interest rates
than conventional loans because they can be more difficult to sell on
the secondary market and the lenders are taking a bigger risk with the
larger loan requirements of expensive homes.
This should not concern buyers that
are looking for mortgages below $400,000 in Connecticut because they
will be conventional loans and on par to the national average.
Mortgage Loans Available in Connecticut
- Fixed Rate Mortgages (FRMs): These are the most popular types
of mortgages in Connecticut, as they carry low interest rates that will
not change over time. The most common time frames are 30 years and 15
years, with 30 years offering a lower monthly payment, but higher overall
cost in interest paid on the loan. On the other hand, 15 year FRM’s
have a slightly lower interest rate with a higher monthly payment due
to the shorter payoff period of the loan. Buyers that can afford 15
year fixed rate mortgages can save substantially on interest payments
over the years.
- Adjustable Rate Mortgages
ARMs will usually start off with
a slightly lower interest rate than fixed rate mortgages, but the difference
can be very small. An adjustable rate mortgage is fixed for a short
time period, usually 1, 3, or 5 years, before rates are allowed to raise
or lower in conjunction to a benchmark interest rate that it follows.
- FHA and VA Loans:
These are government backed loan
programs that offer good rates for those who do not have as much money
to use as a down payment and may have difficulty getting a conventional
loan. It can be difficult to use these types of loans in the more expensive
counties in Connecticut due to them having a loan limit below the average
cost of those homes.
- Jumbo Loans:
Though jumbo loans have slightly
higher interest rates than conventional loans, they are very popular
in Connecticut due to the number of expensive homes that sell above
the high cost area loan limits for most other types of loan.
Additional Loans Available in Connecticut
- Second Mortgages: The interest rate of a second mortgage
will always be higher than the primary mortgage on your home, but they
can be a great way to avoid the cost of private mortgage insurance (PMI),
which is required for down payments less than 20%. In addition, the
interest for a second mortgage is tax deductible, unlike the expense
of PMI. You will want to discuss the differences with your mortgage
broker for your personal situation.
- Home Equity Lines of Credit
(HELOC): For those who have equity in their
home and would like to have access to it, a HELOC will allow you to
use the equity like a credit card, so that you are prepared for any
emergency cash needs.