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Tag Archives: Mortgages

Reduce Refinancing Costs

27 Monday Aug 2018

Posted by Make your Home your Haven! in News you can USE!, Timely Advise

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mortgage fees, mortgage rates, mortgage requirements, Mortgages, Refinance mortgage

There is much more than a lower rate and payment to determine whether to refinance a mortgage.  Lenders try to make refinancing as attractive as possible by rolling the closing costs into the new mortgage so there isn’t any out of pocket cash required.

The closing costs associated with a new loan could add several thousand dollars to your mortgage balance.  The following suggestions may help you to reduce the expense to refinance.

?         Tell the lender up-front that you want to have the loan quoted with minimal closing costs.

?         Check with your existing lender to see if the rate and closing costs might be cheaper. 

?         Shop around with other lenders and compare rate and closing costs.

?         If you’re refinancing an FHA or VA loan, consider the streamline refinance.

?         Credit unions may have lower closing costs because they are generally loaning deposits and their cost of funds is less.

?         Reducing the loan-to-value so mortgage insurance is not required will reduce expenses and lower the payment.

?         Ask if the lender can use an AVM, automated valuation model, instead of an appraisal.

?         You may not need a new survey if no changes have been made.

?         There may be a discount on the mortgagee’s title policy available on a refinance.

?         Points on refinancing, unlike a purchase, are ratably deductible over the life of the loan ($3,000 in points on a 30-year loan would result in a $100 tax deduction each year.)

?         Consider a 15-year loan.  If you can afford the higher payments, you can expect a lower interest rate than a 30-year loan and obviously, it will build equity faster and pay off in half the time.

A lender must provide you a list of the fees involved with making the loan within 3 days of making a loan application in the form of aLoan Estimate and a Closing Disclosure Form.  Every dollar counts, and they belong to you.

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Case Study – Housing Decision During Retirement

16 Monday Apr 2018

Posted by Make your Home your Haven! in Helpful Information, News you can USE!, Timely Advise

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Buying vs Renting, Capital Gains, Mortgages, peace of mind travel, Recreation, Retirement decision, Travel and Retirement

A couple is planning to tour the United States in a travel trailer during their first few years of retirement. They are going to sell their current home now and purchase another home when they finish their travels.

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An interesting exercise is to determine the optimum time of selling the home: now or when they’re ready to buy their replacement home.

If they intend on traveling for more than three years, then, it may be a good decision to sell prior to the sojourn to avoid paying taxes on the gain in their home. IRS allows for a temporary rental of a principal residence while still keeping the $250,000/$500,000 capital gains exclusion intact. A homeowner must own and use a home for three out of the previous five years which means that it could be rented for up to three years, but it would need to be sold and closed before that three-year window expires.

If the travel will be less than three years, there is an option of selling now or later. Using the example below, the homeowner sold the home, paid their expenses and invested the proceeds in a three-year certificate of deposit until the replacement home was purchased.

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As an alternative, if the homeowner rented the home, not only would they have income, the home would continue to appreciate and the unpaid balance would go down resulting in larger net proceeds. Based on a 5% appreciation and continued amortization of the mortgage, the net proceeds could easily be $40,000 more.

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Obviously, there are a lot of considerations that affect the decision to sell now or later but in an appreciating real estate environment, being without a home for several years could affect the financial position of the owner in the replacement property. It is certainly reasonable to look at various alternatives before making a decision. Call me at (225) 291-1234 to help you look at the different possibilities and talk to your tax professional.

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Waiting Period After Distressed Sale

09 Monday Apr 2018

Posted by Make your Home your Haven! in Helpful Information, News you can USE!, Timely Advise, Who New?

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Foreclosures, home financing, home ownership, Mortgage and Foreclosure, Mortgages, Real Estate, taxes, Wait time for Foreclosures and new Mortgage

“How long do we have to wait to qualify for another mortgage” is the question concerning people who’ve had a foreclosure, short sale or bankruptcy. The loan types for the new loan will differ in amounts of time to heal credit scores based on the event.

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The following chart is meant to be a general guide for how long a person might have to wait. During this waiting period, it’s important that the person be current on all payments and maintains a history of good credit.

A recommended lender can give you specific information regarding your individual situation and can make suggestions that will improve your ability to qualify for a mortgage. This process should be started before looking at homes because of the time constraints listed here can vary based on current requirements and possible extenuating circumstances of your case.

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We want to be your personal source of real estate information and we’re committed to helping from purchase to sale and all the years in between. Call us at (225) 291-1234 for lender recommendations.

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Indecision is Not a Decision

17 Tuesday Oct 2017

Posted by Make your Home your Haven! in Finding a Realtor, Helpful Information, News you can USE!, Timely Advise

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Buying a Home, Buying vs Renting, Mortgages, Real Estate, Rent vs Buy, Rent Vs Own, renting vs buying, renting vs buying a home, Savings on buying a home, steps to buying a home, taxes

There could be some legitimate reasons for not buying a home but indecision is not one of them. Indecision is rooted in not having enough information to move forward to own a home or continue renting.

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If you keep renting, at the end of the year, you have had a place to live and a pile of receipts that helped the landlord pay for his house. Deciding to buy a home will give you a place to live that is yours and all the things that come with that.

When you consider principal reduction, appreciation and tax savings, your monthly cost of housing could be much less than the rent you’re paying. The principal reduction included in each payment is like a forced savings account that increases as your mortgage balance decreases. Your equity in the property will also grow due to appreciation as the home goes up in value. The equity is part of your net worth and an investment in your family’s future.

The income tax savings can be an additional financial consideration if the combined interest and property taxes are greater than the allowable standard deduction.

Trends are showing that both tenants and homeowners are staying in their homes longer. It’s been said that whether you rent or own, you’re paying for the home. Do you really want to buy the home for your landlord? Check out your numbers on a Rent vs. Own and then, call us to help make it happen.

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Loan Assumptions are an Alternative..something to consider if you are in the market for a home.

17 Monday Jul 2017

Posted by Make your Home your Haven! in Helpful Information, News you can USE!, Timely Advise, Who New?

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Assumptions Loans, FHA loans, interest rates 2017, Mortgages, Updated Interest Rates, VA Loans

FHA VA Assumption.png

In the late 80’s, both FHA and VA began requiring buyers to qualify to assume their mortgages. The main reason there haven’t been many assumptions in the past 25 years is that interest rates have been steadily going down and if a person has to qualify, they might as well do it on a new loan and get a lower interest rate.

Based on projections by Fannie Mae, Freddie Mac, the MBA and NAR, rates for the second half of 2017 and 2018 are expected to be higher. When interest rates on new mortgages are higher than the rates of assumable FHA and VA mortgages in the recent past, it becomes more advantageous to assume the existing mortgages.

FHA and VA loans originated with lower than current interest rates have great advantages for buyers and sellers.

  1. Interest rate won’t change for the qualified buyer
  2. Lower interest rate means lower payments
  3. Lower closing costs than originating a new mortgage
  4. Easier to qualify for an assumption than a new loan
  5. Lower interest rate loans amortize faster than higher ones
  6. Equity grows faster because loan is further along the amortization schedule
  7. Assumable mortgage could make the home more marketable

An Assumption Comparison can help determine the savings and financial benefits of an assumable mortgage with a lower rate.

 

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Before You Pay Cash for a Home

10 Friday Mar 2017

Posted by Make your Home your Haven! in Helpful Information, News you can USE!

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Debt Free, home financing, home ownership, Mortgages, paying cash, Real Estate Listings, Real Estate News

The National Association of REALTORS® reports in its 2016 Profile of Home Buyers and Sellers that 12% of all buyers paid cash for their home.

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Before paying cash for a home, a buyer should decide if they might put a loan on the home in the near future.  It may affect the ability to deduct the interest on a mortgage placed on the home at a later date.

Homeowners can currently deduct the interest on up to $1 million of acquisition debt which are the borrowed funds used to buy, build or improve a home. Paying cash for a home establishes acquisition debt at zero. The only deductible interest to the owner would be home equity debt which is limited to $100,000 over acquisition debt.

Paying cash certainly seems like a simple decision but it may limit a homeowner’s ability to deduct interest on a future mortgage. You can get more information about this from IRS Publication 936 or from your tax professional.

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It Isn’t Final Until It’s Funded

28 Monday Nov 2016

Posted by Make your Home your Haven! in Helpful Information, News you can USE!

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conventional mortgage, entertainment, FHA mortgage, home loans, interest rates 2016, mortgage qualifications, Mortgages, Refinance mortgage, Today's Mortgage Rates

Mortgage approval isn’t final until it’s funded.  Things can change prior to the loan being closed that can affect a pre-approval such as changes in the borrowers’ financial situation or possibly, factors beyond their control like interest rate changes.40783733-250.jpg

Good advice to buyers is to do nothing that can affect your credit report until the loan closes. Opening new credit cards, taking on new debt for a car or furniture or changing jobs could affect the lender’s decision if they believe you may no longer be able to repay the loan.

The benefits of buyer’s pre-approval are definitive: it saves time, money and removes the uncertainty of knowing whether the buyer is qualified. The direct benefits include:

  • Amount the buyer can borrow – decreases as interest rates rise
  • Looking at “Right” homes – price, size, amenities, location
  • Find the best loan – rate, term, type
  • Uncover credit issues early – time to cure possible problems
  • Bargaining power – price, terms, & timing
  • Close quicker – verifications have been made

It is a very common practice for mortgage lenders to require income and bank verifications and to re-run the borrowers’ credit one final time just prior to closing. Mortgage approval isn’t final until it’s funded.

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It’s the Principal of the Thing

14 Monday Nov 2016

Posted by Make your Home your Haven! in News you can USE!

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credit report, Debt Free, ecomony, home financing, interest rates 2017, Mortgages, principal and interest on loans

Most people think they’ll have a house payment and a car payment for the rest of their lives but it doesn’t have to be with a plan and a little discipline. The plan is to make additional principal contributions to a fixed rate mortgage to shorten the term and save tens of thousands in interest.

 

If a person were to make an additional $100 pay65125303-250.jpgment each month applied to principal on a $175,000 mortgage, it would shorten the loan by five years six months. If the person were to make $200 a month additional payments, it would shorten the loan by 9 years. $459 additional payment would shorten it to 15 years.

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If a person does make a decision to regularly pre-pay their mortgage, it will be their responsibility to verify that the lender is applying the money to the principal each time as opposed to being placed in the reserve account for taxes and insurance.

In today’s market, a savings account pays around 0.5% or less. Even with the low mortgage rates available, there is still a considerable savings. People who might need the funds in the near future should carefully consider this option due to the difficulty to access equity easily from one’s home.

Make your own projections using the Equity Accelerator.

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Build Equity Faster

13 Monday Jul 2015

Posted by Make your Home your Haven! in News you can USE!

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Baton Rouge Real Estate, Build Equity, Building Equity, Buying a Home, conventional mortgage, FHA mortgage, Mortgages, RDloans

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.

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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.

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