Tuesday, October 27, 2015
With mortgage rates below 5% since 2009, you would think any homeowner who should refinance would have already. However, it is estimated, there are approximately 6.5 million borrowers who would benefit with significant monthly savings by refinancing. Rodney Anderson of Supreme Lending, on his weekly radio program, described a recent pipeline meeting where they reviewed every pending mortgage application his company was processing. They had seven refinancing applicants whose current mortgage was over 9% and twelve with a rate between 7% and 9%. “Some 550,000 American homeowners with a mortgage could save $500 or more each month by refinancing at today’s rates. Over three million could save at least $200 per month.” said Ben Graboske, CTO with Black Knight Financial Services. Getting a lower interest rate should be reason enough but eliminating the mortgage insurance should make the decision a no brainer. With increased home values, the loan-to-value ratio may no longer require mortgage insurance which would add additional savings. Homeowners need solid information about what their home is worth and whether they’d benefit from refinancing. The most reliable solution is to talk with a qualified mortgage professional. The internet is a great place for generalized info but each person's situation is unique. Call if you'd like a recommendation of a trusted mortgage professional or would like to know what your home is worth.
The majority of tenants say they would like to own a home but continue to pay rent and missing out on financial and emotional advantages. There seems to still be a lot of misinformation in the marketplace. There are a number of programs for low or no down payment options. Veterans can get into a home with no down payment or closing costs. In qualifying areas, USDA has zero down payment programs. FHA requires 3.5% down payment and there are conventional programs for as little as 3% and 5% down. People with credit issues need expert opinions about their specific situation. Borrowers with bankruptcies or foreclosures may be eligible to purchase again after certain periods of time. There are short-term fixes for some types of credit problems. There is an extended list of individual issues that a skilled mortgage professional may be able to overcome. Most tenants realize considerably lower cost of housing by owning once the appreciation, amortization and tax savings are considered. The savings in the first year alone could easily be more than the down payment required. Plug in your own numbers in a Rent vs. Own to see what your real cost of housing may be. Contact us for a recommendation of a mortgage professional who can give you accurate information about your situation.
Equity is an asset and an appreciating home is an investment. While some people have resolved themselves that a mortgage payment is a normal part of life, others have set goals to get their home paid for as soon as possible. There are several strategies that will work but they all require persistent vigilance. A shorter term mortgage such as 20, 15 or even 10 years will not only pay off sooner, it will generally have a lower interest rate. A recent comparison at Freddie Mac’s Primary Mortgage Market Survey showed a 30 year fixed-rate mortgage at 4.04% compared to a 15 year fixed-rate at 3.20%. The fees for the shorter term were even .1% less. The shorter term with the lower rate would have a higher payment but some people consider it forced savings. Additional principal contributions to any length fixed-rate mortgage will save interest, build equity and shorten the term of the loan. Some homeowners may apply lump sums at various times during the year such as when bonuses are paid or a tax refund is received. Other owners might increase their payment by $100, $200 or more each month. Setting the increased payment through electronic banking would insure that you consistently make the extra amount. Bi-weekly payments make 26 half-payments in a year which equals 13 full-payments. Because of the frequency, it reduces the interest that is due. This might work well for borrowers who are paid every two weeks but could present cash flow problems for those who are paid on schedules that don’t coincide. Making one extra payment a year will have almost the same effect as a bi-weekly payment. The 13th payment would be completely applied to principal. Before embarking on one of these strategies, it would be wise to verify with your lender that it complies with their policies. Check out the Equity Accelerator to see how it could affect your loan.
Among the many reasons people have to own home, they include having a place of their own, to raise a family and to share with friends. Additional benefits include security, investment, peace, pride and enjoyment. Together with the benefits come the responsibility to take care of the home for its livability and viability as a sound decision. A homeowner's concerns can be broken down into three areas. The maintenance on the property is something that every homeowner deals with. Changing filters are easy to handle yourself. Other things might require a skilled professional but identifying the “right” one can be challenging. Minimizing expenses can reduce the cost of living in the home. Its good to recognize when a repair is appropriate compared to a replacement. Reputable and reasonable service providers are key to keeping expense low. Managing debt and risk becomes the financial side of the effort. Taking advantage of low interest rates or shorter terms for refinancing, making additional principal contributions are just a few ways to manage debt. Home warranty programs and homeowner insurance tips can reduce risk. We sincerely want to be a resource for you not only when you buy or sell but all of the years in between. It is actually the reason we send this newsletter to you.
Why would you consider refinancing if your mortgage is only two or three years old and the rate is not considerably higher than what is currently available on new loans? Because you may be able to eliminate the mortgage insurance and have significant monthly savings. Many homes have seen their values rise in the past few years. The current loan-to-value ratio may be low enough to no longer require mortgage insurance. In some cases, a homeowner might actually pay a little higher rate than they currently have but lower their monthly payment dramatically because the mortgage insurance isn’t required. A rough rule of thumb is that mortgage insurance is not needed on loans at or less than 80% of value. There could be programs available that would allow a higher LTV than 80%. Careful consideration should also be given to the fees required to refinance. Lenders differ in not only the rates they charge but also the fees associated with the loans and the process. If you’d like a recommendation of a trusted mortgage professional, we’d be happy to make a recommendation.