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Category: Refinance (Page 1 of 10)

Refinance in Today’s Market…Really? Why It’s More Common Than You Think!

Believe it or not, refinances still make up almost one third of all mortgage transactions, even though rates have risen.  You may be wondering why this might be…

Many consumers have amassed a large amount of debt, paying much higher rates of interest, thanks to the Fed hiking rates so aggressively. 

Most out there are only making the minimum payments, with no path to paying off their debt.  At the same time, most homeowners have record levels of equity in their homes.

Today’s homeowners are benefiting from a type of refinance where they pull that equity out of the home to pay off those debts, saving money on the overall monthly payments. 

There are several compelling reasons why a cash-out refinance can be a beneficial move.

Debt Consolidation

By consolidating high-interest debt into a lower-interest mortgage, homeowners can potentially save money in the long run.

For instance, paying off credit card debts, car loans, or personal loans with a cash-out refinance can reduce overall interest payments, saving money on monthly payments and providing more financial breathing room.

I have a Debt-Consolidation calculator and a Blended Interest Rate calculator available to analyze all client situations, as well.

Immediate Funds Available

Accessing the equity built up in a home through a cash-out refinance can provide funds for a wide variety of uses.

Whether it’s home improvements, debt consolidation, paying for education, or other significant expenses, this approach allows homeowners to tap into the equity they’ve accumulated.

The interest rates for mortgages are often lower than rates for personal loans or credit cards, making a cash-out refinance a potentially more cost-effective way to access funds.

Adding Flexibility

A cash-out refinance provides flexibility for homeowners to manage their finances according to their needs and goals.

Whether it’s securing funds for an investment opportunity, addressing unforeseen expenses, or improving the home’s value and livability, this financial tool offers a versatile way to leverage the equity in one’s home for various purposes.

Additionally, there are ways to gain equity at an accelerated pace and significantly shorten the length of your mortgage, by applying those savings as an additional payment each month.

Call me today to review your current debt situation and see if I can help!

The Fed’s Decision, Continued Home Appreciation, and Refinance Opportunities

There’s been a flurry of news recently, so let’s take a look at what’s been going on – both with interest rates and home valuation.

Is the Fed Done With Rate Hikes?

After eleven rate hikes since March of last year, the Fed left their benchmark Federal Funds Rate unchanged at a range of 5.25% to 5.5% at their meeting last Wednesday, just like they did in September.

The Fed Funds Rate is the interest rate for overnight borrowing for banks and it is not the same as mortgage rates.

When the Fed hikes the Fed Funds Rate, they are trying to slow the economy and curb inflation.

What’s the bottom line?

The Fed’s decision to pause rate hikes for the second straight meeting was unanimous. However, Fed Chair Jerome Powell did leave the door open for another rate hike at their next meeting on December 13.

The strength of the labor sector remains a key factor in their decision, with the Fed looking for clear signs that the labor market is softening as they consider further rate hikes.

While the latest job reports for October were weaker than forecasted, it remains to be seen if that’s enough for the Fed to pause additional hikes.

The Fed will see November’s job data from ADP and the BLS (releasing December 6 and December 8, respectively), along with upcoming inflation reports, which will certainly play a role in their decision.

Home Prices Hitting New Highs

The Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed home prices nationwide rose 0.9% from July to August after seasonal adjustment, marking the seventh consecutive month of gains.

The Federal Housing Finance Agency’s (FHFA) House Price Index also saw home prices rise 0.6% in August, with their index reporting gains every month so far this year.

Note that FHFA’s report measures home price appreciation on single-family homes with conforming loan amounts, which means it most likely represents lower-priced homes. FHFA also does not include cash buyers or jumbo loans, and these factors account for some of the differences in the two reports.

What’s the bottom line?

Home values have hit new all-time highs according to Case-Shiller, FHFA, CoreLogic, Black Knight and Zillow, more than recovering from the downturn we saw in the second half of 2022. This year, prices are on pace to appreciate between 6-8% depending on the index, based on the reported pace of appreciation through August.

These indexes show that now remains a great opportunity for building wealth through homeownership and appreciation gains.

Refinance Opportunities

Refinances still make up almost one third of all mortgage transactions, even though rates have risen.  You may be wondering how this can be? 

Many consumers have amassed a large amount of debt, paying much higher rates of interest, thanks to the Fed hiking rates so aggressively.  And many of those individuals are only making the minimum payments, with no path to paying off their debt. 

At the same time, most homeowners have record levels of equity in their homes.

Many homeowners are benefiting from a type of refinance where we pull that equity out of the home to pay off those debts, saving money on the overall monthly payments. 

Additionally, there are ways to gain equity at an accelerated pace and significantly shorten the length of your mortgage, by applying those savings as an additional payment each month.

Call me today to review your current debt situation and see if I can help!

A Fantastic Option for Homeowners and Investors with a Low Mortgage Rate and Equity…The Home Equity Loan

I have a new and unique loan product available for homeowners and investors – one where you can use your property’s equity without refinancing out of your current mortgage and its low interest rate.

It’s available for primary residences, 2nd homes, AND investment properties, as well!

This isn’t your standard Home Equity Line of Credit (HELOC) that carries a variable interest rate in the double digits. 

This is a fixed-rate option that can help free home equity to consolidate high-interest credit card debt, do home improvements, pay tuition, and more. 

Again, all of this without refinancing your current low-rate mortgage!

One of the most compelling reasons to tap into home equity is the opportunity to access low-interest funds.

Home equity loans offer significantly lower interest rates compared to other forms of borrowing, such as credit cards or personal loans. This lower cost of borrowing can result in substantial savings over the life of a loan.

The Home Equity Loan

Certain restrictions apply…and here are some specifics:

One of the most appealing aspects of this program is that it enables homeowners to tap into their home’s equity without selling or refinancing their property.

This means you can access the value you’ve built up in your home while still retaining ownership, your currently low interest rate mortgage, and the potential for property appreciation.

This plan provides a financial cushion without forcing homeowners to make major changes to their housing situation or change their existing mortgage rate.

Utilizing Home Equity

Tapping into your home’s equity can be a wise financial decision for several reasons.

Consolidating high-interest debt, such as credit card balances or personal loans, with a home equity loan can be a prudent financial move.

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By consolidating debt at a lower interest rate, you can reduce monthly payments, pay off debt more quickly, and streamline your financial obligations.

This can provide significant relief and help you regain control of your finances.

In Conclusion

Utilizing home equity can be a sound financial strategy when done thoughtfully and responsibly. Whether for home improvements, debt consolidation, education, investments, or emergency funds, accessing the value you’ve built in your home can provide cost-effective and versatile financing options.

Please do reach out to me for specifics – it would be my pleasure to sit down with you and go over your current situation and see if a home equity loan would work for you.

Removing Mortgage Insurance: A Guide to Financial Freedom

Mortgage insurance is a common expense that many homeowners face, especially when they buy a house with a down payment of less than 20% of the purchase price.

Understanding how to remove mortgage insurance can really help in lowering your overall mortgage payment.

Let’s take a look at how to remove this financial hurdle and ultimately save money in the long run.

Understand the Types of Mortgage Insurance

Before diving into the removal process, it’s crucial to comprehend the two main types of mortgage insurance: Private Mortgage Insurance (PMI) for conventional loans and Mortgage Insurance Premium (MIP) for FHA loans.

Both serve the same purpose: to protect the lender in case the borrower defaults on the loan. PMI can be removed under certain circumstances, while MIP remains for the life of the loan for FHA borrowers.

Achieve 20% Equity

The key to removing PMI on conventional loans is reaching 20% equity in your home. Equity is the percentage of your home’s value that you own outright.

You can accomplish this in several ways, such as making extra payments towards your principal balance, making home improvements that increase its value, or waiting for your home to appreciate naturally over time.

Tracking your loan balance and property value will help you gauge when you’ve reached the 20% threshold.

Request PMI Cancellation

Once you believe you’ve achieved 20% equity, contact your lender to request the removal of PMI. They may require an appraisal to verify your home’s current value.

If the appraisal confirms your equity position, your lender should terminate the PMI premiums.

It’s essential to stay diligent and follow up to ensure this happens, as some lenders may not automatically remove PMI.

Refinance Your Loan

Another way to remove mortgage insurance is by refinancing your loan…and this is how you remove MIP from FHA loans.

If market interest rates are lower than when you initially purchased your home, refinancing could not only save you money on your monthly payments but also allow you to secure a loan without mortgage insurance if your equity position has improved. 

This is the option most used by homeowners.

In Conclusion

Understanding how to remove mortgage insurance is a crucial financial piece that can help you save money in the long run when you become a homeowner.

Achieving 20% equity and requesting PMI cancellation or refinancing your loan are two effective strategies to eliminate this extra expense.

Please do reach out to me today to discuss your current situation, as I’d be more than happy to discuss your options!

Big and Welcomed Changes Here For New FHA Loans

FHA mortgages have long provided first-time homebuyers and those with less-than-stellar credit an affordable way to achieve home ownership. But one of the main drawbacks of these mortgages has been that their mortgage insurance costs are relatively high.

Reduced mortgage insurance rates go into effect today for many FHA borrowers. The typical borrower will pay 0.55% of their loan amount annually in mortgage insurance costs (as opposed to the .85% rate previously) – a decrease of 30%!

The White House announced Wednesday that the US Department of Housing and Urban Development (HUD) will lower annual mortgage insurance premiums (MIP) on FHA mortgages. These loans are insured by HUD’s Federal Housing Administration.

Mortgage insurance is required on all FHA loans (regardless of down payment size) to allow for more flexible qualification requirements, like a lower credit score.

FHA mortgages are used for primary residences, not 2nd homes or investment properties.

Overview of the Changes

Mortgage insurance is paid as a percentage of the borrower’s loan amount, and how much an individual pays depends on how much they borrowed, their down payment, and the loan term. Currently, most borrowers pay an annual mortgage insurance rate of 0.85%.

To show the monetary value of this change, a borrower in a $265,000 home would save about $800 per year. A borrower with a $467,700 home – the national median home price in December 2022 – would save more than $1,400 annually, according to the HUD press release.

By reducing the costs for this type of loan, more people may be able to afford owning a home.

This is especially true for low-income and first-time home buyers, who tend to benefit from FHA loans the most.

This change is a welcome reprieve for Americans who, in the last year, have experienced higher home prices, housing costs and mortgage rates.

The Bottom Line

By reducing the costs associated with getting an FHA mortgage, HUD aims to make home ownership more affordable. 

Nearly 84% of FHA mortgage borrowers are first-time homebuyers, and 43% of FHA borrowers are low income, according to HUD.

Also, FHA mortgage rates are generally lower than conventional rates. So, it will be in buyers’ best interest to have a mortgage pro who can work with them to figure out which loan program would be the best for their current situation.  It wouldn’t surprise me to see conventional loan originations drop because of these FHA changes.

Where Can I Get More Information?

Contact me directly to discuss your current situation and how you might be able to take advantage of today’s FHA changes.  It would be my pleasure to help you!

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