All posts in Refinance

Refinancing: Whom Can Your Trust?

by Justin Miller on September 20, 2010 in Mortgage Education 101, Refinance with No comments

That was the headline in The Wall Street Journal and I have included the link below.  There has never been a more important time to deal with a mortgage expert.  As I have said a hundred times lately, there is much more to a mortgage than an interest rate. 

You truly get what you pay for in life and I think many people are slowly starting to realize that.  If someone offers an interest rate much lower than everyone else it either doesn’t exist or you are going to receive very poor service and advice. 

I am not kidding when I say that I get numerous calls a week about deals that did not close and they found out at the last minute.  The other day a client called and said he needed to refinance his property to get his name off of the loan so he can buy another home.  I mentioned doing an assumption and he said he is working on that right now.  However, prior to that he tried refinancing his FHA mortgage but the appraisal came in too low.  I asked why he didn’t do an FHA Streamline Refinance Without an appraisal and he said his mortgage person never mentioned that.  Now, that low appraisal is tied to the property and his only hope is that his current mortgage servicer will do the assumption. 

There is no set formula for determining when it benefits you to refinance.  It all depends on how long you plan on keeping the loan, how far in you are with your current loan, the costs and savings involved, etc.  This is especially true with FHA refinances since they can be more costly with the Upfront Mortgage Insurance Premium.  You need a Mortgage Professional to help guide you. 

http://online.wsj.com/article/SB20001424052748704652104575494190518195172.html 

Should You Get a Fixed Rate or Adjustable Rate Mortgage?

by Justin Miller on August 25, 2010 in Conventional Loans, FHA Loans, Mortgage Education 101, Refinance with No comments

Just as with most questions regarding mortgages the answer would be it depends.  There are no set rules with this or anything else pertaining to financing.  Every borrower’s situation is different and that is why it is important to deal with someone who is going to guide in you the right direction, a Mortgage Consultant if you will. 

My personal opinion right now for most would be to get a 30 year fixed rate mortgage.  I say this because interest rates are so low.  Yes, they are lower on adjustable rate mortgages but I feel this economy is too unpredictable that who knows if you will truly pay it off before the rate adjusts.  Another point to add to that is why would you want to pay off a mortgage that you are financing in the 4 percents?  Make sure to max out your retirement first, payoff high interest rate credit cards, have a rainy day fund, etc.

I have a client right now who is trying to decide between a 15 year fixed and a 30 year fixed.  Interest rates are about .5% lower on 15 year fixed rates but if you take out a 30 year fixed rate you can amortize it over 15 years and make a 30 year payment should you need to.  If you take out a 15 year fixed you have to make that payment whether you want to or not.  I had a client who refinanced into a 15 year fixed rate 2 years ago, called me a year ago to refinance into a 30 year because he was worried about his job, and just as we started the refinance process he lost his job.  Now he is stuck with a 15 year fixed payment without a job.  It is sad and scary. 

This is just another reason as to why everything isn’t all about interest rates.  I don’t mean to beat a deadhorse but you can’t what you pay for in life and if you are getting financing from the cheapest person that is probably the type of advice you are going to get.

How Do You Know Which Mortgage Bank or Broker To Use?

by Justin Miller on June 25, 2010 in Conventional Loans, FHA Loans, Mortgage Education 101, Refinance with No comments

This is an easy question, an experienced and honest one.  The hard part is how do you determine who that is when everyone is a sales person.  You probably won’t know until it closes or down the road but hopefully with the new National Mortgage Licensing System (NMLS) that is going into effect will help. 

The NMLS requires all Mortgage Loan Originators (MLOs) to pass a state and national exam, do a criminal background check, and have a credit report pulled.  As long as everything checks out each MLO will get their own unique identifier number that you will be able to look up. 

Too many borrowers get caught up in the interest rate.  Although you don’t want to get a rate that is .5% above everyone else you do want to make sure that they are advising you and putting you in the right mortgage product, an 1/8th to a ¼ of a point in interest rate won’t change your life but a transaction gone bad will.  

What do I mean by that?  I mean that someone should be asking you about how long you plan on staying in the home, look at your credit card debt, see if you want to max out your retirement, etc.  If the answers are yes to looking to pay down credit card debt and maxing out your retirement you shouldn’t be going into a 15 year fixed most likely.  If you want to make bi-weekly payments you probably want to be told that it may not be a good idea to set it up with your lender and instead just add an extra amount of principle each month so that after 12 months you will have made 13 payments.  You don’t want to have a higher set payment and one month need extra money because of an unexpected expense.

I could go on for days on this topic but the most important thing to remember is that there is a lot more to a mortgage than just an interest rate.  There are a lot of great banks and lenders out there but they are only as good as they people they employ and who is handling your loan.

Refinancing Your Loan After A Cash Purchase

by Justin Miller on June 2, 2010 in Mortgage Education 101, Refinance with No comments

I have been getting a good amount of calls from people who are buying or just bought a home with cash and now want to refinance.  The first step is to ask the question prior to buying but if you didn’t I still can help you. 

Fannie Mae and Freddie Mac who if you want the rates you see advertised are the guidelines you want your bank to be underwriting your loan to.  The problem is that they require you to own the property for 6 months before you can refinance your loan.  If you have owned the property between 6 to 12 months your refinance will be based off of the lesser of your purchase price or appraised value.  After 12 months they will go off of the appraised value.

The only way you will be able to refinance within the first 6 months is if your bank or lender is going to put the loan in their portfolio.  What that means is they hold onto the loan and it’s not being sold to Fannie Mae or Freddie Mac.  I happen to have an investor that will do that.  The interest rates are about 1% higher but if I were able to lock in a rate today at say 5.875% versus normal rates of say 4.875%, I would do it.  I wouldn’t want to risk where rates will be in 6 months.  That isn’t to say I am right or I would win that bet but it’s I just don’t like to gamble.

If You Refinanced You May Owe The IRS

by Justin Miller on April 13, 2010 in Mortgage Education 101, Refinance with No comments

I am not a CPA and make sure to always consult one but I wanted to share this with you because it is new to me. 

People who cashed out refinances, or had part of their mortgage debt forgiven when they sold their homes through short sales, will probably owe the IRS a big payback.

In 2007, Congress passed the Mortgage Forgiveness Debt Act, but that doesn’t let everyone off the hook.

Here are exceptions to the rule:

• Anyone who did a cash-out refinance and spent the money on something not housing related, then got in trouble and lost their home to a foreclosure or short sale, will owe the IRS as if the money from the refinance were earned income.

• The IRS will forgive tax liability only on money from home-equity loans that was spent to improve the property.

• Anyone who lost a vacation home or investment property to foreclosure or short sale will owe Uncle Sam.

• Multi-million dollar homes — lost or sold — are always subject to tax.

http://www.realtor.org/RMODaily.nsf/pages/News2010040904?OpenDocument&WT.cg_n=RMO&WT.cg_s=RSSDaily 

Why Now Is The Time To Refinance

by Justin Miller on April 10, 2010 in Refinance with No comments

I have been saying for quite some time that now is the time to refinance because interest rates are at historical lows and they really have nowhere to go but up.  I don’t think you are going to see interest rates skyrocket overnight but I also don’t know how long they will stay this low.  So my opinion is that you lock in your rate now. 

The article below talks about what you should do if you have a low interest rate adjustable.  Just as the article suggests, if you are planning on moving soon you should probably stay put.  I would agree with that however in an unpredictable economy can you guarantee that you will be moving or that you will be able to sell your home?  We all hope things are better in the next 24 months but no one can know for sure. 

Meredith Whitney, a top financial analyst, is calling for a double dip recession in housing.  She has done pretty well on her picks with the housing market.  Some are even calling for a 30% drop in Florida.  I think you should be prepared for another 10% drop but who am I. 

The bottom line is to take advantage of these low rates if you can and don’t be greedy.

http://online.wsj.com/article/SB20001424052702304830104575172032313214888.html?mod=djemITP_h 

Some Can’t Refinance And Some Won’t

by Justin Miller on March 3, 2010 in Refinance with No comments

Those who want to refinance and can’t probably don’t want to hear this.  Just as the article points out there are many out who have rates in the 6 percents and just are not refinancing.  That isn’t just the article stating that, I have seen it.  I sometimes feel like I am twisting someone’s arm because I keep bothering them trying to get them to refinance.  Of course that is how I make money but I just don’t want to see anyone miss out on savings.  Here is a great breakeven tool from Bloomberg to see how long you need to keep your loan in order to recover the costs of refinancing http://www.bloomberg.com/invest/calculators/refinance.html. 

I always make sure to do a breakeven analysis for my clients manually.  Some think they won’t be in their home for long enough to recover the costs.  This is an assumption and also speculation.  In a market where we have no idea where home values are headed I would assume you will be in your home longer than you think.  You can also look at wrapping some or all of the closing costs into the interest rate.  That way there is no cost up front but you do get a monthly savings. 

There are many that are just underwater that cannot refinance.  There isn’t much that can be done here unless they increase the maximum loan to value on the Home Affordable Refinance, The Obama Refinance. 

http://online.wsj.com/article/SB20001424052748704358004575096020101445724.html#mod=todays_us_page_one

Divorce and Your Home

by Justin Miller on January 31, 2010 in Refinance with No comments

Not only is it important to talk with a divorce attorney but you will also want to speak with a mortgage professional if you and your spouse own a home together.

If you choose to keep you home you will want to know how to go about refinancing the mortgage and the best route depending on whether you need to take cash out of the property or just remove the spouses name from the loan. 

Many do not know that you can get a name delete assumption.  A name delete assumption is getting someone else’s name removed from the mortgage and keeping the same loan.  It is much less expensive then your traditional refinance.  You will want to call your mortgage servicer and ask for the assumption department.  Every bank is different so the costs will vary.  I believe Wells Fargo charges $500 but if you have an interest rate of 5% and rates are now at 6% you will want to keep that low interest rate. 

The article below has a lot of great information. 

http://mortgageminute.mortgage-market-news.com/2009/11/12/divorce-mortgage-–-essential-things-you-need-to-know-about-your-house/

Homes As ATM’s

by Justin Miller on December 27, 2009 in Refinance with No comments

Not anymore but that certainly isn’t by choice.  It is hard to get cash out of your home due to the amount of equity that is required in a home.  For a regular Conventional loan you typically can’t go above 80% loan to value (have to have 20% equity) and with a home equity line of credit it is around 70% loan to value. 

Taking equity out of your home for remodeling, improvements, investments, and paying down debt can be okay depending on how it’s used with each.  Just as I recently posted, renovations aren’t adding value to homes as much as they used to.  You don’t want to invest the equity into something risky, always consult a financial planner.  And when it comes to paying down debt you need to make sure it’s really saving you as much money as you think since your new payment is most likely based on 30 years. 

I think banks should somehow restrict how the money is used.  I am not sure exactly how you do that but for instance if someone is paying off credit card debt they should require the borrower to sign something at closing that will be sent to the credit card company with the payment stating they are closing the credit card account.  We just don’t have self-control and if that credit card is still open there is a good chance that you will use it again. 

The bottom line is be careful what you use this money for from your home. 

http://www.cnbc.com/id/34592393 

Refinance Now, Even Bernanke Did

by Justin Miller on December 21, 2009 in Interest Rates, Refinance with No comments

Even our Fed Chairman has refinanced and he had an adjustable at 4.125% that was going to adjust down.  With the Fed’s buying of mortgage-backed securities ending at the end of the 1st quarter of 2010 interest rates will go up.  No one knows how much and how fast but they will go up. 

Always make sure that it makes sense for you by dividing the costs of the refinance by the monthly savings to figure out how many months it will take to recover your money.  If you are unsure of how long you will be in the home my opinion is that you are better safe than sorry. 

“Locking into a fixed rate mortgage looks like a sensible thing for any homeowner to do with long rates at historic lows now. Of course, Mr. Bernanke isn’t any homeowner. One has to wonder what the decision to refinance implies about his beliefs about where rates are going in the future. Refinancing suggests he sees them going up eventually. But that shouldn’t be too big a surprise to people given that short-rates, at zero, can’t go any lower and given that Mr. Bernanke has been talking about the Fed’s exit strategy and a recovery for months. Does it say anything about the timing of eventual rate hikes or the magnitude? Very doubtful.”

http://blogs.wsj.com/economics/2009/12/18/looking-a-little-deeper-at-bernankes-floating-rate-mortgage/

← Older Entries
Newer Entries →