Facebook
X
Pinterest
Copy Link
If you’re buying a house or a rental near Indianapolis, you need to know the one number your lender watches every day. If not, you take rate news from headlines and guesses. But if you do, you know where your quote sits before anyone tells you.
1. The ^TNX floor. Open your phone’s stock app and search ^TNX. That’s the 10-year Treasury yield, the closest thing to a risk-free return. If an investment pays less than that, you’re better off buying the Treasury. If inflation runs 4% and your “safe” account pays 2%, you’re losing money slower than the guy doing nothing.
2. Treasury plus two. Mortgage rates are almost always the 10-year plus roughly 2 points. When lenders text me current rates, 99 times out of 100 it’s that spread. If the 10-year is at 4%, expect mortgages near 6%.
You don’t need anyone’s guess. You need addition.
3. The 80/20 pref test. A common partnership: the money partner puts in 80%, the operator puts in 20%. The money partner gets a preferred return a few points above the 10-year, then profits split 50/50. Fair to both sides. What I see too often: the preferred return and then 80% of what’s left, while the operator does all the work.
4. The advisor fee test. A portfolio expected to return 7% with a 1.5 to 2% fee nets you about 5 to 5.5%. Compare that to the 10-year, with zero fees. Sometimes professional management barely beats the bond.
5. The loan constant. Take a year of payments and divide by the current balance. A $5,000 equipment loan at $1,000 a year: 20%. A $400,000 mortgage at about $30,000 a year: 7.5%. The mortgage is 80 times bigger and still the cheaper debt. Pay off the highest constant first, not the scariest number.
Sources: Fannie Mae, ‘What Determines the Rate on a 30-Year Mortgage?’ (Dec. 2024).
You don’t need a house picked out or a plan. If you’re wondering what may or may not be possible for you, email me at nlamkin@c21scheetz.com and let’s talk it through.
