There is so much in real estate and mortgage news this week….what do we talk about? What do we leave out?
Okay, well since we’ve had numerous calls about the mortgage rates, why don’t we start there? We saw a weakening market this week which caused rates to bump up just a hair but they are still at neutral buoyancy around 3.875% to 4.25% for the fixed rate 30 yr and 3.125% to 3.5% fixed for the 15 year. The 5-1 ARM is a great deal for a few folks in the low 3’s .
Word to the Wise: If the rate and terms you are being quoted today give you something to brag about, lock it to today. Better to commit on a low rate today and have some bragging rights and be a little disappointed when the rates go lower, than to NOT lock the rate and be angry & frustrated when the rates jump higher.
The White House just passed a law requiring all Fannie Mae and Freddie Mac backed loans to add a Guarantee fee (or G-Fee) to the cost of each loan closed. That means if you are closing on a $200,000 loan, it will add about $200 to your closing costs. If you are closing on a $100,000 loan, it will add about $100 to your closing costs.
This rule is required to go into effect on April 1st but some lenders are starting to implement it early.
Word to the wise: Get your home purchase or refinance closed now and not later.
The new government HARP 2 refinance program that does not take appraisal values into consideration will help several people who are underwater on their loans and even others who aren’t . This program is expected to be fully released on March 17th.
My very capable assistant, Susan Belew and I are working over-time getting your loan ready so that you do not have to wait as long when the program rolls out. If you want to get ahead of the rush, call Susan and me right now on our business line (901) 482 0354. That’s (901) 482 0354. Susan is standing by the phone to talk off the air with you about your refinance or if you want to purchase a home.
In fact, Susan and I would like to ask you to do something that may help someone you know. And you know how it makes YOU feel if you can help someone you care about:
Here it is: This week, think back and remember when a friend or family member told you that they just keep running short on money each month and feel as though they can’t get ahead. If that friend or family member owns a home, Susan and I would like to do a free analysis on their financing to see if we can free up a few hundred dollars a month for them. Call us at (901) 482 0354.
Ah—here’s some good news…
Jobless Claims fell by 50k to 352k, their lowest level since April 2008, and their largest drop since 9/2005. Woo hoo! Bring on the jobs!!!
More good news from REMAX, one of the largest real estate brokerage firms in the nation– REMAX, real estate brokerage company reported that December sales rose 5.7% on a non-seasonally adjusted basis after falling 5.7% in November. “We’re pleasantly surprised to see the year end with such strong sales, and hope this trend will continue into the traditional spring selling season,” said Margaret Kelly, CEO of RE/MAX LLC. She noted sales were driven by an increased number of investor transactions.
Well, well….we were just talking about that last week when Richard Scarbrough and Kevin Perk were here.
And now to the topic at hand today. We are talking about “Keep Your Lifestyle–How to Make Your House Pay YOU” and we have Troy McDonald and Ken Bowley, our insurance experts, to share some helpful insight into how you can use life insurance, long-term insurance and disability insurance to protect your home and your family’s lifestyle.
Check out our podcast for the information on the full topic.
Mortgage questions:
(1) What is the difference between a homeowner getting a Home Equity Line of Credit and getting a reverse mortgage?
Jo answers : “First of all, before anyone is allowed to apply for a reverse mortgage, they must complete a consultation with an FHA-approved Housing Counselor to make sure the reverse mortgage is right for you–since its not the right choice for everyone.
Jo answers: Secondly, on a Home Equity Line of Credit the homeowner has to make monthly payments to the bank to pay off the loan. If they miss payments, the bank can foreclose on the house. .On a reverse mortgage, since there are not payments due, the bank cannot foreclose on the home while the homeowner is living there.
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Jo answers Thirdly, on an Equity Line of Credit the homeowner has to get approval based on their credit and their income and must prove they have plenty of liquid assets available
Not so on the reverse mortgage: since the homeowner does not have to make payments, the bank does not check credit (except for bankruptcies), the homeowner does not have to prove income or show a large amount of liquid assets.”
(2) What kind of trends do you see with homeowners wanting to refinance? Do most people want to just lower their house payments or shorten the term?
Jo answers: “We mostly see homeowners wanting to free up cash each month to pay off higher interest rate debt, to pay for school or to reinvest somewhere else (presumable for a bigger return than they are paying on the mortgage rate)
We see another group of homeowners who simply want to get the mortgage paid off quicker and get a low rate in the mid to low 3’s. Those homeowners are refinancing from a 5% or higher interest rate with, say 20 yrs or more left on the loan, to a 3.25% rate with only 180 months to reach pay off. The homeowner, in most cases is saving about 5 to 10 years off the mortgage. This can be very attractive because in some cases the number of years on the loan is reduced but the payment does not go up -or in some cases actually comes down.
(Example: If you have a $200,000 loan balance and you’re paying a principal and interest payment of $1,136/mo–and you have 25 years left on your mortgage that means you have $340,800 in total payments left to pay. But if you refinance the $200,000 to a 3.25% rate for 15 years you now pay a principal and interest payment of $1,405/mo times 15 years which is a total paid out of $252,960. You just saved about $87,800 in total mortgage payments . What a deal!
Some people are getting cash out to reinvest somewhere else but most are just wanting to lower the note or shorten the term or both. ”
(3) We are talking today about how to make your house pay for insurance. What other ways can you get your house to pay for things?
Jo answers: “If its feasible for you to get cash out on your house, you can use the cash out to pay off other debt that has a much higher interest rate. Once the high interest rate debt is paid off, you can turn around and start prepaying your mortgage to shorten the term, or you can reinvest the money somewhere else like for education, a car or investment venture.
A more and more popular trend is to rent out the bonus room or guest house to create an extra cash flow. I personally have been doing it for years on my house. For the very first time my mother is renting the efficiency apartment over her detached garage. It creates an extra income for her and provides a nice apartment with lower- than- normal rent for a young graduate just getting started in her career. ”
Real Estate Tip of the Week: If you are planning to keep your home for 5 yrs or more, it probably makes sense to refinance your property if you can save enough to recapture your closing costs in 12 months or less than 24 months.
If you are shortening the term on your refinance and you plan on keeping the house for 10 years or more, if you compare the total payments over the number of years on your refinance and the total exceeds the amount of closing costs by triple or more, it probably makes sense to refinance.