Finance

When is it time to refinance your home mortgage? or, Are the Mortgage Rates Ripe for a Refinance?

Are the mortgage interest rates near historical lows? Could today’s rates be close the lowest that any of us have ever seen? Guess what, they are. What can this mean for those of us who are worried about the economy and our own financial future? There is an opportunity for home owners and investors to save money on their mortgages. This is also an opportunity to save money on a mortgage for a new purchase. Did you know that a 1% change in rate can increase (or decrease if the rates go up) your purchasing power by 10%.

So what about a refinance? When is it time to refinance? There is the old tale of needing a 1% reduction in rate for a refinance to make sense. Could this be true? NOT! Sorry, I learned that from my kids.

There are many things that can make a refinance good or bad. The key factor is the “Recapture Period”. How long will it take to recapture the cost of the refinance through the “savings in interest rate”? This quote is very important. A sales person has the capacity to make a bad refinance look like a good one. If you look only at the reduction in monthly payment you not be getting the whole story. The re-amortization of a mortgage could save you hundreds of dollars in cash flow but not really save you any money through true savings on the new rate. Mortgages are re-amortized when they are refinanced. This means that if you are 8 years into a 30 year fixed rate the payment could be reduced significantly by the addition of another 8 years of payments without having any significant savings in interest rate.

So how can you really know if you are getting the good deal on a refinance? Can you really trust your salesperson loan officer? That is a hard question to answer. If you know the right questions to ask you will be able to find out exactly how much you are going to save on your refinance. I’ll bet you are thinking “Sure buddy, what are the questions?”. Here we go.

1. What is the recapture period of this refinance? This tells you how long it will take to recoup the upfront costs of the loan through the interest savings, not the savings in cash flow from a lower payment. This is important even if you roll all of the costs into the loan. When rolled into the loan they are still real and it is money spent. There are times when a lower payment is sufficient reason to refinance.

2. Always ask what the recapture period is with points and no points. When paying points the industry standard is 2.0%. Please remember that Origination fee, Points and Discount are all the same thing. They are fees that the borrowers pay to get a lower interest rate.

3. What is the benefit to you if you do pay points? Does it increase or decrease your recapture period? Does the payment of points put you into a higher loan to value that could increase your interest rate or mortgage insurance?

4. How long do you think you will be in the house? If you are not sure about how long you want to stay you could be throwing thousands of dollars away. I would recommend that you have a plan to stay in the home several years beyond the recapture period.

5. If everything looks good at this point it is time to look at future financial needs. A refinance is a great time to get some cheap money for projects, new vehicles or possibly a rebuild of an older vehicle. I have even seen people us this opportunity to pull some cash to max out their retirement accounts for the year. I call this forced savings as you will now have to make payments on this money that you “Saved”.

This is all great information if used. Going back to the beginning of this blog, remember the interest rates are great right now. If you are not sure where to start try your Realtor. Realtors rely on reputable lenders to help them get buyers into houses. These same lenders can help you evaluate your refinance potential. Most lenders can tell you if you are in a good position to refinance with a simple 5 minute phone call. I hope that you found this information helpful . If this saves one person from getting a bad deal I will be happy. Sincerely, Jack DeCook Sr. Home Mortgage Consultant. Please feel free to give me a call for a free recapture analysis.

“An opportunity is never lost, it is simply found by someone else” Benjamin Franklin

Short Sales, What They mean to Your Credit as a Seller

Short Sales have been made to seem like a really good thing. They help the seller out of a financial bind. They enable a Buyer to get a good deal on a home. They enable Realtors to sell a home that would otherwise not be saleable. A short sale even gets a bad loan off of a bank’s books. This all sounds really good and I believe that it is. There has been something left out of the equation though.

What does this do to the seller’s credit rating? In all of the articles, blogs and press releases that I have read the subject has not come up. Why is this? I am not in a position to say. I can let you know what it does to a seller’s credit. A Short sale shows up as a foreclosure. I have been told by many that a Short sale is not as bad as a foreclosure.

This is true in a moral sense. A short sale allows a home owner to take the high road. To do the job of the banks REO department in helping to dispose of a troubled asset. As for the Sellers ability to get a loan after taking this “High Road”. They will have a foreclosure on their credit report and will have to wait a minimum of 2 years before another lender will talk to them about getting a new home mortgage. If you look you will find that there are some lenders who are making exceptions to this rule.

So why not just let it go to foreclosure? Because we are “Americans” and want to do the right thing! So how about just toughing it out by making the payments even if they hurt? I understand that many people are in positions which make this option impossible. There are many that are going the short sale route as an easy out. You can stop making payments on your home. Live there for free. Why not everyone else is? When and if the home does sell the lien holder will eat the cost of carrying the house during the sale period because the Seller is doing the right thing.

I hope that you have found this blog thought provoking. I applaud those who are genuinely trying to do the right thing by helping the owner of the mortgage loan get out with a smaller loss than they would have realized if the home where to go through a traditional foreclosure. To those of you who are in a genuine bind due to loss of income or value in your home and those who got swindled into a bad loan with increasing payments, I offer my condolences. In this case I would recommend that you talk to a Realtor who specialises in distressed properties. You will find their assistance to be quite valuable.

Sincerely, Jack

Insurance 101- The Learning Curve Series: What is Insurance Anyway?

Think of Insurance as a pool of money that is available to scoop up if certain events occur. Those Events or Perils are in an agreement called the Insurance Policy. The Insurance Policy is a Ccontract that is unilateral (one sided) and is written by the Insurance Company.

You the Insured agree to this Contract and the provisions written in it, does this means you should read the policy?  YES please read your policy as that is your agreement and the obligations for both parties are spelled out in detail.

When you have questions call your agent, a good agent is an advocate for you and the Insurance Company if you have an issue of concern.

Insurance 101-The Learning Curve Series: Insurance Inspection, Why?

I just paid to have an inspector look at the home and the lender approved my home but the Insurance Company also inspected the Home and says I have to remove the moss, Whats going on?

Buyers please remember that the two inspections are for different reasons, For example the inspection for the loan might note there is excess wear on the roof or that there is moss on the roof. The roof will last a few more years but the chances of an insurance claim may go up dramatically.

The insurance looks at the moss and the used up roof as is there may be a future claim. The Insurance company is in business to pay for damage and the risk of the wind blowing off the roof and the water damage may be more than they are willing to take at a preferred rate.

The lender may be willing to loan because they dont have to pay for a wind damaged roof. These and many more questions about Insurance Inspections are just a phone call away.

Rich Dad Poor Dad Investment Training

Author: Anna Cove

Rich Dad poor Dad Investment Training

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Jhon Peterson

Rich Dad Poor Dad: Rich Dad Poor Dad

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