The Lending Coach

Coaching and teaching - many through the mortgage process and others on the field

Category: Refinance (page 1 of 4)

Economic Turbulence on the Horizon – Recession, Rates, and Real Estate

It does look like most economists are pointing to a recession (although most do think it will be relatively mild by historical standards) in the next 12 months.

A recession occurs when there are two or more consecutive quarters of negative economic growth, meaning GDP growth contracts during a recession.

When an economy is facing recession, business sales and revenues decrease, which cause businesses to stop expanding.

How do the economists know this?  And what does this mean for interest rates and real estate values?  Read on for more…

Recessionary Indicators

The Yield Curve

One of the major indicators for an upcoming recession is the spread between the 10-year US treasury yield and the 2-year US treasury yield.

While various economic or market commentators may focus on different parts of the yield curve, any inversion of the yield curve tells the story – an expectation of weaker growth in the future.

What does this inverted yield curve look like?  Here’s a good depiction:

Why does inversion matter?  Well, the yield curve inversion is a classic signal of a looming recession. 

The U.S. curve has inverted before each recession in the past 50 years. It offered a false signal just once in that time. 

When short-term yields climb above longer-dated ones, it signals short-term borrowing costs are more expensive than longer-term loan costs. 

Under these circumstances, companies often find it more expensive to fund their operations, and executives tend to temper or shelve investments.

Consumer borrowing costs also rise and consumer spending, which accounts for more than two-thirds of U.S. economic activity, slows.

Unemployment

Unemployment is a recessionary factor, too – as economic growth slows, companies generate less revenue and lay off workers to cut costs.

A rapid increase in the overall unemployment levels—even if relatively small—has been an accurate indication that a recession is underway.

Here’s a chart that shows what happens when unemployment starts to trend upward – and notice that recessions follow shortly thereafter:

As you can see, when things in the economy starts to slow down, one of the first things business do is to reduce their labor force.  The curve is flatting now, and unemployment might be ticking up soon.

Mortgage Rates During Recession

When a recession hits, the Federal Reserve prefers rates to be low. The prevailing logic is low-interest rates encourage borrowing and spending, which stimulates the economy.

During a recession, the demand for credit actually declines, so the price of credit falls to entice borrowing activity. 

Here’s a quick snapshot of what mortgage rates have done during recessionary periods:

Obtaining a mortgage during a recession might actually be a good opportunity. As mentioned, when the economy is sluggish, interest rates tend to drop.

Refinancing or purchasing a new home could be a great way to get in at the bottom of the market and make a healthy profit down the road. A borrower should be market- and financially savvy when considering large real estate purchases in a recession

Real Estate During Recession

Believe it or not, outside of the “great recession” of 2007 (which was caused, in part, to a housing crisis), home values and real estate actually appreciate historically during times of recession.

That seems counter intuitive…but because interest rates generally drop during recessionary periods, homes become MORE affordable to potential buyers (even though property values are higher), due to the lower payments provided by those lower rates.

When more people can qualify for homes, the demand for housing increases – and so do home prices.

In Closing

Although no one likes to see recession, you can observe that it actually can be beneficial for homeowners and would-be purchasers to refinance or purchase during these periods.

If you have more questions and or would like to strategize about purchasing or refinancing, don’t hesitate to contact me, as it would be my pleasure to help you!

Which Is Better: Cash-Out Refinance or a HELOC?

When you need cash for home improvements, school tuition, a down payment for a 2nd home, or debt consolidation, you might want to consider tapping into what could be your greatest source of wealth — your home equity.

Interestingly, there is more than one way to access your home equity – so it’s smart to compare available options to find the right fit.

Two of the most popular ways are a home equity line of credit (HELOC) and a cash-out refinance. Both of these loans can work if you want to access your home equity, but they do work rather differently.

The “Cash-Out” Refinance

Cash-out refinancing involves replacing your current home loan with a new one. The “cashing out” part of the equation means you essentially take out a larger home loan than you currently have so you can receive the difference as a lump sum. This strategy works for those who have equity in their homes due to paying down their mortgage balances or appreciation of their property.

To qualify for a cash-out refinance, you need to meet similar requirements as you would if you were applying for a first mortgage – and you must have the equity in your home to qualify, as well.  You can borrow up to 80% of your home’s value.

So, let’s assume your home has a value of $300,000 and you want to take cash out. In that case, you could only borrow up to $240,000 through a cash-out refinance. If you owe that much or more on your home already, you wouldn’t qualify.

The Home Equity Line of Credit (HELOC)

While a cash-out refinance requires you to replace your current mortgage with a new one, a HELOC lets you keep your first mortgage exactly how it is.

Acting as a second mortgage, a HELOC lets you borrow against your home equity via a line of credit. This strategy allows you to withdraw the money you want when you want it, then repay only the amounts you borrow.

You now have two mortgage payments to make each month – your first mortgage payment and the new HELOC.

To qualify for a HELOC, you need to have equity in your home. Depending on your creditworthiness and how much debt you have, you may be able to borrow up to 85% of the appraised value of your home after you subtract the balance of your first mortgage.

For example, let’s say your home is worth $300,000 and the balance on your mortgage is currently $200,000. A HELOC could make it possible for you to borrow up to $255,000, because you would still retain 85% equity after accounting for your first mortgage and your HELOC.

Generally speaking, HELOCs work a lot like a credit card. You typically have a “draw period” during which you can take out money to use for any purpose. Once that period ends, you may have the option to repay the loan amount over a specific amount of time or you might be required to repay the balance in full.

Like credit cards, HELOCs also tend to come with variable interest rates, so you should be prepared for some rate volatility.

Key Differentiators

Before you decide between a HELOC or a cash-out refinance, it helps to do some analysis on your personal finances and your overall goals.

A cash-out refinance may work better if:

  • Your current home loan has a higher rate than you could qualify for now, so refinancing could help you save on interest
  • You need more than $50,000 overall
  • You prefer the stability of a fixed monthly payment or only want to make one mortgage payment every month
  • You have high-interest debts and want to consolidate them at the same rate as your new mortgage
  • What you save by refinancing — such as savings from a lower interest rate — outweighs the fees that come with refinancing
  • You are able to roll your closing costs/fees into the new loan amount so there are no out-of-pocket costs

A HELOC may work better if:

  • You are happy with your first mortgage and don’t want to trade it for a new loan
  • You need less than $50,000 overall
  • Your first mortgage has a lower interest rate than you can qualify for with today’s rates
  • You aren’t sure how much money you need, so you prefer the flexibility of having a line of credit you can borrow against
  • You want to be able to borrow up to 85% of your home’s value versus the 80% you can borrow with a cash-out refinance

Here’s a quick “snapshot” of two different options – notice how the smaller transaction works well with the HELOC, the larger one with the refinance.

As you can see, for the smaller transaction, the HELOC is less expensive overall – both in fees and monthly payment. However, once you go over the $50,000 mark in cash-back, it appears that the cash-out refinance is the most economical, all things considered.

I’d invite you to find out more from Gina Pogol at The Mortgage Reports here….and Holly Johnson at Magnify Money here….

HELOC Pros and Cons

Pros

  • Applying for a HELOC allows you to maintain the terms of your original mortgage, which can be an advantage if your rate is low.
  • You can use money from a HELOC for anything you want, and you only have to repay amounts you borrow.
  • HELOCs tend to come with lower closing costs than traditional mortgages and home equity loans.
  • HELOCs can generally be closed quicker than refinances

Cons

  • Taking out a HELOC means you’ll need to make two housing payments every month — your first mortgage payment and your HELOC payment.
  • Interest on a HELOC is no longer tax-deductible, unless the funds are used for acquisition or updating your home.
  • They are more expensive the more you borrow – if you are needing more than $50,000, your payments might be higher than that of a refinance
  • Since you only repay what you borrow and the interest rate on HELOCs is typically variable, you may not be able to anticipate what your monthly payment will be. Your monthly payment could also be interest only at first, meaning your payment won’t go toward the principal or help pay down the balance of your loan.
  • The interest rate on HELOCs tends to be higher than first mortgages, and their variable rates can seem riskier. You may also be required to pay a balloon payment at the end of your loan, so make sure to read and understand the terms and conditions.

Refinance Pros and Cons

Pros

  • You can use the money from a cash-out refinance for anything you want, including home upgrades, college tuition, a vacation or debt consolidation.
  • If rates have gone down or your credit has improved since you took out your original home loan, you could refinance your mortgage into a new loan with a lower interest rate.
  • You can choose from different types of loans for your refinance, with various terms and fixed or variable rates available.
  • Interest on your first mortgage may be tax-deductible.
  • Interest rates on first mortgages tend to be lower than other options, such as home equity loans or HELOCs.

Cons

  • Closing costs for a cash-out refinance are typically higher than those of a HELOC
  • If interest rates have gone up since you purchased your home, you could be trading your mortgage for a higher interest loan that will be more expensive.
  • Refinancing your home to take cash out may leave you in mortgage debt longer.
  • You won’t qualify for a cash-out refinance unless you have at least 80% equity in your home after the process is complete.

In Conclusion

As you can see, there’s really no right or wrong decision to be made here, but it is important that you know the benefits and drawbacks of both options. Please do reach out to me for more information, as I’d be happy to go over the specifics of your scenario to find the best option.

Mortgage Options for Newly Self Employed Borrowers

Self-employed mortgage applicants must prove stability of employment and income, traditionally going back at least two years.  This regulation is a bit tougher than it is for regular salaried employees.

Traditionally, mortgage lenders have required two years federal income tax returns in securing a mortgage for purchasing or refinancing real estate. 

Fortunately, there is a way to use just one year of tax returns to qualify for a mortgage. 

This can help newer business owners, as well as those who experienced a down year in the past.

Introducing Two-X Flex 1-Year

Finance of America Mortgage has a new, proprietary product that drastically reduces the amount of documents and simplifies qualification. 

Two-X Flex 1-year requires only one year of income documentation and offers borrowers more flexibility in qualifying for a mortgage.   

Product Details

  • 1-year of income documentation used for qualifying
  • Wage earner and self-employed borrowers
  • Up to 90% loan-to-value with no mortgage insurance
  • As low as 640 minimum FICO
  • $100,000 minimum loan amount
  • Up to $3,000,000 maximum loan amount
  • 30 year fixed
  • 5/1, 7/1 and 10/1 ARM –fully amortizing and interest only
  • Primary Residence, Second Homes, Investment Properties
  • Up to 50% debt-to-income ratio
  • 1-2 units, PUD and warrantable condos

In order to utilize this one-year requirement, it’s important to understand that your tax return must reflect a full year of self-employment income.

For example, if you became self-employed in April 2017, that year’s tax returns are not going to reflect a full year.  If you started your business in November 2016, then your 2018 tax returns will demonstrate a full year of experience running your business.

Give me a call to find out more – as there are multiple alternatives that we can examine!

The Top 10 Mortgage Questions a Borrower Should Ask

It’s a good idea to put together a list of questions to ask potential lenders in order find out which one will be best for you. These and other questions should help you choose the right lender and the best home loan.

How do I obtain pre-approval?

One of the best ways to ensure a smooth home buying process is what you do before you begin your home search.

Mortgage pre-approval, without the pressure of a closing date, is easier than trying to engineer a full approval from the ground up. And having a pre-approved mortgage means you can close faster when you’re ready to buy.

Ask the lender what documentation they need and what processes they have in place to secure and automated underwriting approval.  If they can’t provide that information, find another lender!  You can find out more about the pre-approval process here….

Which type of mortgage is best for me?

This question will help you know if you’re talking to someone who wants to sell you a loan quickly — or a trusted loan advisor who will be looking out for your best interest.

When you ask, “What are my options?” for a particular type of loan, the mortgage lender should dive deeper into your situation and ask YOU questions about your financial goals.  You can really gauge the professionalism of the lender by the questions he/she asks.

What’s your communication style?

Mortgage lenders can communicate with you in multiple ways – including by phone, email and text. Some are tech savvy and others prefer traditional methods.

The point is to be clear about what you prefer.

If you respond more quickly to text messages versus voicemail – tell your loan officer. Often times, there are time sensitive issues that arise during the loan process, so it will make everyone happy if your loan officer knows how to get questions answered, additional documentation etc. in a timely manner.

How often will I be updated on the loan’s progress?

You should be introduced to all parties that will be involved with your loan – from the originator, to the processor, and any other assistants.  Have their contact information handy during the loan process.

And how will you be updated on the progress: by email, phone or an online portal?  How often?

I recommend that you share your service expectations upfront, and check to see if the lender you are working with has these types of processes in place that meet your requirements.  If not, move on!

How much down payment will I need?

A 20% down payment may be nice, but borrowers have multiple choices. Qualified buyers can find mortgages with as little as 3% down, or even no down payment, depending on the property location.

Again, there are considerations for every down payment option and the best lenders will take the time to walk you through the choices, based on your stated goals. You can find out more about down payment requirements here….

Will I have to pay mortgage insurance?

If you put down less than 20%, the answer will probably be “Yes.” Even if the mortgage insurance is “lender paid,” it’s likely passed on as a cost built into your mortgage payment, which increases your rate and monthly payment.

You’ll want to know just how much mortgage insurance will cost and if it’s an upfront or ongoing charge, or both.  You can find out more about mortgage insurance here….

Are You Equipped to Approve Loans In-House?

Underwriters review loans and issue conditions before approving or rejecting a loan. Ask if the lender handles its own underwriting and does their own approvals.  This can be a make or break proposition if you need to close the loan in a timely fashion.

What other costs will I pay at closing?

Fees that are charged by third parties, such as for an appraisal, a title search, property taxes and other closing costs, will be paid at the loan signing. These costs will be detailed in your official Loan Estimate document and your almost-time-to-sign Closing Disclosure.

Your lender should be absolutely upfront regarding this. You can find out more about closing costs here….

How long until my loan closes?

Of course, you want to know what your target closing and move-in dates are so you can make preparations. And just as important: Ask what you should avoid doing in the meantime — like buying new furniture on credit and other loan-busting behavior.

Is there anything that can delay my closing?

Well, buying a home is a complex process with many stages and requirements. While delays are normal, the best way to avoid them is to stay in touch with your lender and provide the most up-to-date documentation as quickly as you can.  If you have any past credit issues or job related changes, let your lender know immediately to avoid any last minute delays.

Delayed Financing – A Great Purchase and Financing Option

Paying cash for a house has its advantages. Purchasing with cash rather than getting a mortgage could help you as the buyer win a bidding war when buying a new home. You may even be able to negotiate a lower price on the home if you’re paying cash.

After all, cash in hand is a sure thing, and a mortgage approval can take some time and isn’t always guaranteed.

Delayed financing is a specific program that allows the buyer to take cash out on a property immediately in order to cover the purchase price and closing costs for a property they had just purchased with cash.

How Delayed Financing Works

Delayed financing is a mortgage that is originated on a property after you already own it, in comparison to a typical mortgage that is used for the acquisition of a property. The delayed financing mortgage option allow buyers to compete with all-cash buyers when purchasing the property. 

By financing the property after the initial cash transaction, the borrower/buyer is able to regain their liquidity because the money isn’t tied up in the house after the delayed financing is completed.

Keep in mind that the value of the property might not the same as the purchase price. Borrowers will need an appraisal done by their new lender to determine the value.  Moreover, your new loan can’t be more than what you paid for the property plus your closing costs and lender fees.

Why Delayed Financing?

Delayed financing is generally helpful for:

  • Investors who want to compete with all-cash buyers’ short timelines
  • Investors who want to have more bargaining power because they’re paying with cash
  • A property that has multiple offers and the seller doesn’t want to wait on financing
  • Investment properties, vacation homes, and primary residences
  • An investor who wants to take their cash out and buy another investment property

The primary reason to utilize delayed financing is that buyers can stay liquid. Investors use delayed financing to recover their cash and be able to purchase another property.

Generally, delayed financing is right for an investor who wants to take advantage of all of the benefits of purchasing a home using all cash. They can often negotiate a lower price, close faster and compete with multiple other buyers. An investor who doesn’t immediately qualify for conventional financing may also opt for delayed financing.

An Investor’s Point of View

In this case, the buyer is an investor and purchases a property using all cash.  The buyer then wants to free-up some cash back to buy another property.

The buyer can then delayed financing to recoup the cash and take a loan out on the new property, utilizing the cash back from the initial transaction!

A Primary Occupancy Borrower’s Point of View

The buyer can also use this option to compete with all-cash buyers and negotiate better terms. Delayed financing can be done as quickly as three weeks after purchasing the property, which is different from a standard “cash-out refinance” transaction, where the borrower must wait six or more months.

How Long Do You Have to Wait to Refinance?

If you’re doing a delayed financing transaction on a property you purchased in the last 6 months, you’re allowed to take cash out immediately without any waiting period.

Under normal circumstances, if you bought a home with a mortgage instead of cash, you have to be on the title at least 6 months before you can take cash out and refinance your home, so delayed financing is a notable exception.

Delayed Financing Qualifications

There are certain qualifications that need to be met in order to qualify for a delayed financing transaction.  Most specifically, the property must have been originally purchased using all cash.

Lenders generally have the following qualifications for this type of transaction:

  • Arm’s Length Transaction: You can’t be related to or have a personal relationship with the seller
  • Closing Documents: Closing statement from the property purchase
  • Proof of Funds: Showing where you got the funds to purchase the property
  • New loan amount can be no more than the actual documented amount of the borrower’s initial investment in purchasing the property plus closing costs.
  • Appraisal: Ordered by the lender and paid for by you, generally $500-plus

There can be more needed and other regulations may apply, but these listed above are most standard.

Although you may have just ordered an appraisal when you originally purchased the property, as mentioned previously, the lender will want to conduct their own appraisal before they approve your loan.

It would be my pleasure to help any borrower with a delayed financing transaction, so don’t hesitate to reach out to me for more information or to get started!

How to use a cash-out refinance to purchase another home

Photo courtesy gotcredit.com

I work with a fair amount of second home buyers and investors – and am asked how to best go about financing these properties (and second homes), as well as their required down payments.

I recently ran across this article from Peter Miller at The Mortgage Reports – and it’s a great read for those looking to tap into home equity to purchase another home.

I’d invite you to read the full article here – and I’ll mention a few key highlights:

How much equity do you have?

At first, it may seem that the equity issue is simple. You bought a house for $150,000 and it’s now worth $275,000.

You’ve paid down principal, too, so your current equity is $190,000.

Can you really get a check for almost $190,000 from lenders?

Lenders generally will allow cash-out refinancing equal to 80 percent of your equity. They will see a property value of $275,000 and subtract 20 percent ($55,000). That will leave around $220,000. This money will be used to first repay the existing loan of $85,000. The balance – $135,000 – represents the cash available to the borrower.

With some program, you might do better. The VA cash out mortgage allows qualified borrowers to refinance up to 100 percent of their equity while the FHA cash out loan will go to 85 percent. However, these programs come with various charges and insurance costs that many borrowers with equity will want to avoid.

Cash-out refinance to buy another home

With cash-out refinancing, you can use the equity in your home for many things — but not for all things. For instance, you can use the money to pay for college tuition, to purchase a business, or buy another property.

Buying a second home or investment property

In terms of real estate, you can use real estate equity to immediately buy a second home or to purchase an investment property.

As soon as you close the cash-out refi, you can use those funds as a down payment on another home — or to buy the house outright — if you plan to keep the current home as your primary residence.

How to Go About a Refinance

Reach out to your lender to begin the application process.  He or she should be able to coach you through the process – and identify the key pieces that will help you make an informed decision.

I’ve helped numerous investors with this process, and I’d be glad to see if this option might work for you, as well!  Give me a call for more….

It’s Time To Seriously Consider a Refinance

Tapping into home equity by refinancing is more of a possibility today and becoming very popular for many borrowers.

As interest rates have moved lower in the last 3 weeks and housing values across the country continue to steadily increase, homeowners now have access to a much larger source of equity and possibly better payment terms!

With current mortgage rates low and home equity on the rise, many think it’s a perfect time to refinance your mortgage to save not only on your overall monthly payments, but your overall interest costs as well.

It’s really about managing the overall assets that you have in order to maximize the returns. Make sure you are working with the right mortgage lender to help in figuring out which product is best.

What is a Cash-Out Refinance?

A mortgage refinance happens when the homeowner gets a new loan to replace the current mortgage. A cash-out refinance happens when the borrower refinances for more than the amount owed on their existing home loan. The borrower takes the difference in cash.

Rates Are Down and Home Equity is Up

Since rising home values are returning lost equity to many homeowners, refinancing can make a good deal of sense with even a small difference in your interest rate. Homeowners now have options to do many things with the difference.

More home equity also means you won’t need to bring cash to the table to refinance. Furthermore, interest rates can be slightly lower when your loan-to-value ratio drops below 80 percent.

Here’s what many of my customers are doing with that equity:

  • Consolidate higher interest debt
  • Eliminate mortgage insurance
  • Purchase a 2nd Home or Investment Property (or a combination of both)
  • Home Improvement – upgrades to kitchen, roof, or pool

Benefits of Cash-out Refinances

Free Up Cash – A cash-out refinance is a way to access money you already have in your home to pay off big bills such as college tuition, medical expenses, new business funding or home improvements. It often comes at a more attractive interest rate than those on unsecured personal loans, student loans or credit cards.

Improve your debt profile – Using a refinance to reduce or consolidate credit card debt is also a great reason for a cash-out refinance. We can look at the weighted average interest rate on a borrower’s credit cards and other liabilities to determine whether moving the debt to a mortgage will get them a lower rate.  Some borrowers are saving thousands per month by consolidating their debt through their mortgage.

More stable rate – Many borrowers choose to do a cash-out refinance for home improvement projects because they want a steady interest rate instead of an adjustable rate that comes with home equity lines of credit, or HELOCs.

2nd Home or Investment Property – many borrowers are utilizing the value of the cash in their home to purchase rental properties that cash flow better then the monthly payments of the new loan.

Tax deductions – Unlike credit card interest, mortgage interest payments are tax deductible. That means a cash-out refinance could reduce your taxable income and land you a bigger tax refund.

Reasons NOT to Refinance

Terms and costs – While you may get a lower interest rate than your current mortgage, your cash-out refinance rate will be higher than a regular rate-and-term refinance at market rate. Even if your credit score is 800, you will pay a little bit more, usually an eighth of a percentage point higher, than a purchase mortgage. Generally, closing costs are added to the balance of the new loan, as well.

Paperwork headache – Borrowers need to gather many of the same documents they did when they first got their home loan. Lenders will generally require the past 2 years of tax returns, past 2 years of W-2 forms, 30 days’ worth of pay stubs, and possibly more, depending on your situation.

Enabling bad habits – If you’re doing a cash-out refinance to pay off credit card debt, you’re freeing up your credit limit. Avoid falling back into bad habits and running up your cards again.

The Bottom Line

A cash-out refinance can make sense if you can get a good interest rate on the new loan and have a good use for the money.

Using the money to purchase a rental property, fund a home renovation or consolidate debt can rebuild the equity you’re taking out or help you get in a better financial position. 

With that said, seeking a refinance to fund vacations or a new car might not be that great of an idea, because you’ll have little to no return on your money. 

It would be my pleasure to see if this type of plan might be a good one for you.

Refinance 101 – Now Is The Time To Estimate Your Monthly Savings

Featured Image: Jake Rustenhoven (gotcredit.com), Flickr

Tapping into home equity with a mortgage refinance is becoming very popular for many borrowers.

Many borrowers can now save hundreds, possibly thousands on their overall monthly payments by consolidating debt inside of a new mortgage.

As housing values across the country have appreciated nearly 35% over the last 5 years, homeowners now have access to a much larger source of equity.

With current mortgage rates still historically low and home equity on the rise, it’s a perfect time to refinance your mortgage to save not only on your overall monthly payments, but your overall interest costs as well – and take best advantage of today’s tax implications.

Improve Your Debt Profile

Using a refinance to reduce or consolidate other debt like credit cards, student loans, home-equity lines, and car payments is a great reason for a cash-out refinance.

We can look at the weighted average interest rate on a borrower’s credit cards and other liabilities to determine whether moving the debt to a mortgage will get them a lower rate.  Some borrowers are saving thousands per month by consolidating their debt through their mortgage.

An Example

Let’s assume that you purchased your home 6 years ago (or longer) for $270,000 and you currently have a little less than $200,000 remaining on your existing mortgage.

Well, that home today may well be worth in excess of $350,000!

Even if you’ve refinanced since and have an interest rate in the 4% range, if you have any other sources of debt, a refinance will most likely result in a large monthly savings.

Debt List

Let’s assume you have a debt list that looks something like this – or a combination of similar liabilities:

A few credit cards, a car payment, and a student loan (or even a home-equity line of credit) can easily total nearly $50,000 overall and over $1,000 per month.  Many of the customers that work with me are in situations very similar to the one listed above.

New Payment and Monthly Savings

So, when you combine all of your liabilities into the mortgage, here’s what your new overall payment looks like:

Note that the monthly savings is nearly $900 per month!!

New Loan

Here’s what a new refinanced loan might look like:

Your loan amount has increased by about $50,000 – and your mortgage interest rate has also increase by over 1.25%. However, your OVERALL interest rate of all debt will most likely be similar to where you are today (assuming credit card debt is more like 15% or more). Also, you will only have one payment to manage – versus balancing multiple payments.

Better Options

Now, let’s do a little more math…

Let’s say you take that $900 in savings every month and apply it to the new mortgage:

That’s right – you would save $55,000 over the life of the loan and reduce your number of payments by 213! You would be turning your 30-year mortgage into a 12.25 year version.

The numbers are staggering.  One other thing to do would be to check with your CPA or financial advisor, as the interest on the new loan would most likely be tax deductible, whereas any home equity lines and credit card interest are generally not tax deductible.

Please do reach out to me right away and we can take a look at your current scenario to see if a refinance might be a good option for you, as it would be my privilege to help!

Homeowners See Biggest Equity Increase in 4 Years – Another Great Reason to Buy or Refinance

Rising home prices might be a little frustrating for would-be buyers right now.

But let’s take a look what’s happening for those who already own a home to see the true benefits of ownership. Home equity increases are being seen throughout the country – and this bodes well for the economy – and those who purchase or refinance a home in the coming months.

According to new data from CoreLogic, the average homeowner saw their home equity jump by more than $15,000 last year alone – the biggest increase since 2013.

Aly Yale at The Mortgage Reports has put together a fantastic piece – see the entire article here.

It Pays to Own Your Home

According to CoreLogic’s recent Home Equity Report, American homeowners saw a 12 percent year-over-year jump in equity from 2016 to 2017. Though the average homeowner gained $15K in equity for the year, in some states, it rose as high as $44,000.

Frank Nothaft, CoreLogic’s chief economist, credits rising home prices for the uptick in equity.

“Home price growth has been the primary driver of home equity wealth creation,” Nothaft said. “The average growth in home equity was more than $15,000 during 2017, the most in four years.”

Though increased equity certainly spells good news for existing homeowners, it also bodes well for the country’s economy at large.

“Because wealth gains spur additional consumer purchases, the rise in home equity wealth during 2017 should add more than $50 billion to U.S. consumer spending over the next two to three years,” Nothaft said.

What This Means For Today’s Buyers

Owning a house provides the owner with a valuable asset and financial stability. By purchasing a home, you’ll have an asset that, in most cases, will appreciate in value over time. A $200,000 home today should see an increase in value to $250,000, $300,000, or more—depending on how long you plan to live there and market conditions.

This makes your home one of the best investments you can make and a way to establish a financial foundation for future generations (aka your kids).

A home can be the ultimate nest egg, providing you with a great investment for retirement. The longer you own your home, the more it should eventually be worth.

As you get older, you can sell the home and use the proceeds to purchase or rent something smaller. Another option: Rent out the house to maintain a steady income stream so you can travel or use for other recreational activities.

Why Now?

Despite rising home prices, American housing is actually quite affordable – and now is really a good time to make that purchase.

According to the latest Real House Price Index from First American Title, today’s home buyers have “historically high levels of house-purchasing power.”

And though real home prices increased 5 percent over the year, they’re still 37.7 percent below their 2006 peak. They’re also more than 16 percent below 2000’s numbers.

Because mortgage rates are lower than historical averages, home-buying power is up. Find out more regarding home affordability here….

The Refinance Market

As housing values across the country continue to steadily increase, homeowners now have access to a much larger source of equity.

With current mortgage rates low and home equity on the rise, many think it’s a perfect time to refinance your mortgage to save not only on your overall monthly payments, but your overall interest costs as well.

Since rising home values are returning lost equity to many homeowners, refinancing can make a good deal of sense with even a small difference in your interest rate. Homeowners now have options to do many things with the difference.

More home equity also means you won’t need to bring cash to the table to refinance. Furthermore, interest rates can be slightly lower when your loan-to-value ratio drops below 80 percent.  Find out more about the new refinance movement here…

It would be my privilege to help would-be-buyers or refinancers understand the current marketplace and the loan options that can help you own a part of the American dream!

That House Will Probably Cost More The Longer You Wait

Today’s potential home buyers have many questions about local real estate markets and how it relates to the purchase of a new home. The one I hear the most is:

‘Does it make sense to buy a house in now, or would it be better to wait until next year?’

Click on the video above to find out more,

Well, there are some things we just can’t predict with certainty, and that includes future housing costs….however,

most economists and forecasters agree that home values will likely continue to rise throughout 2018 and into 2019. Secondly, these same experts also predict that interest rates will continue to rise.

Houses Are INCREASING in Value and Are Getting More Expensive

As usual, it’s a story of supply and demand. There is a high level of demand for housing in cities across the country, but there’s not enough inventory to meet it. As a result, home buyers in who delay their purchases until 2019 will likely encounter higher housing costs.

According to Zillow, the real estate information company, the median home value for Arizona increased to over $233,000 – a year-over-year increase of 6.7%. In California, the median home value is over $465,000 – an increase of 8.8%. Looking forward, the company’s economists expect the median to rise by another nearly 5% over the next 12 months. This particular forecast projects into the first quarter of 2019.

Other forecasters have echoed this sentiment. There appears to be broad consensus that home values across the country will likely continue to rise over the coming months.

The Supply and Demand for Housing

It is the supply and demand imbalance that’s the primary factor in influencing home prices. So it’s vitally important for home buyers to understand these market conditions.

Most real estate markets, including California and Arizona are experiencing a supply shortage. Inventory is falling short of demand, and that puts upward pressure on home values.

Economists and housing analysts say that a balanced real estate market has somewhere around 5 to 6 months worth of supply. In both California and Arizona today, that figure is in the 2.5 to 3 month range. Clearly, these markets are much tighter than normal, from an inventory standpoint. This is true for other parts of the nation as well, where inventory levels are in the 4-month range.

Interest Rates

There has been a slow increase in interest rates since September of 2017 – and a quicker jump in the last few months.  Bond markets haven’t seen pressures like this in over 4 years – and things are trending higher.

Many investors believe inflation is bound to tick up if the labor market continues to improve, and some market indicators suggest inflation expectations have been climbing in recent months.

This is a general reflection better economic data, rising energy prices and the passage of sweeping tax cuts.  Many think could provide a further boost to the economy – giving consumers more money at their disposal.

If positive labor and economic news keep pouring out (as most analysts believe things will continue to improve), then the prospect of inflation will put pressure on bonds and interest rates.

The Federal Reserve has suggested that they will have 3 to 4 interest rate increases in 2018, and most experts see a .5% to 1% overall increase in mortgage rates this year.

In Conclusion

So, let’s take a look at our original question: Does it make sense to buy a home in 2018, or is it better to wait until 2019?

Current trends suggest that home buyers who delay their purchases until later this year or next will most likely encounter higher housing costs. All of these trends and forecasts make a good case for buying a home sooner rather than later. Please reach out to me for more, as it would be my privilege to help!

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