The Importance of Refinancing Your Home

Now is the time to buy a home, and you've probably heard that from multiple sources; the news has been reporting it, friends may be telling you, and we've written about it in previous blogs. The reason for this is the low interest rates, actually the lowest they've been in many years. The same reason it is a good time to buy is the reason it's a great time to refinance. Refinancing takes your current loan and applies the current interest rate to a newly designed loan, thus lowering your monthly payment and total owed. In this blog we will are discussing why refinancing your home is something you absolutely should consider.

A decrease of just a quarter to a half of a percentage point in interest can drastically decrease your monthly payment. By not refinancing at these low rates, you could be paying much more than necessary.  There are a few ways you can lower your monthly mortgage payment:

•Refinance to a lower interest rate

•Change the term of your mortgage

•Refinance to an interest-only loan

Refinancing to a lower interest rate will decrease your monthly payment. Changing the term of your mortgage means you can change it from a 15 year mortgage to a 30 year mortgage. You would do this to spread the balance of your mortgage over a longer period of time and reduce your monthly payment. However, if one of your financial goals is saving long term and you have a 30-year mortgage,  you may want to shorten the term to 15 or 20 years. You will be paying more monthly, but you will be paying much less in interest over term of the loan, which would save you thousands. If you refinance to an interest-only loan, the amount you pay monthly is the interest for a limited amount of time, but you can pay as much principal as you like on top. This is desirable because once you pay all of the interest, you will have a lower mortgage payment and surplus of funds. 

Right now the interest rates are the lowest they've been in years, which means refinancing your home is a very attractive financial strategy.   At Intercoastal Mortgage Company we specialize in the purchasing and refinancing of homes and we would be happy to help you in the process. You could go from an outrageous interest rate to a low rate just from doing a little paperwork. Contactme and together we can refinance your home.

15 Year or 30 Year Mortgage-Which Is Right For You?

The main difference between 15-year and 30-year mortgage may seem obvious, but there are a few things to consider when making this decision.  15-year loans are going to have monthly payments that are substantially greater than a 30-year loan, but you pay less in interest.  30-year terms have lower monthly payments, but you pay significantly more for the house in the long run, due to the amount of interest paid over a longer period of time.

This decision is about more than just the math; there are other important considerations, such as retirement savings, risk tolerance, and discipline. Consult with your mortgage lender and run some numbers using calculations for both 15-year term and 30-year term. Once you have some figures to work with, consider the following points before making a final decision.

* What can you afford? A hybrid version of this decision is to take a 30-year mortgage and pay it off in 15 years by sending in extra payments. Doing this you will pay slightly more in interest than with the 15-year interest rate, but still significantly less than with the 30-year loan.

*  If you take a 15-year term with a higher payment, make sure you have a wide safety net, such as a savings account with a large balance, to cover any major unexpected expenses or loss of income. If you don’t have this kind of financial resource, you may want to stick with a 30-year term and use any extra money to build a strong savings account.

*  If you are considering a 15-year term mortgage, make certain you will still have the resources to put as much into your retirement accounts as possible and still meet your other savings goals. If either of those financial resources will be at risk by you taking the shorter mortgage option, it may be wiser to protect those and go with the 30-year term.

*  The 30-year borrower will pay less in annual taxes because they are paying more interest than the 15-year borrower.

In the end, your financial situation will determine the right mortgage term. At Intercoastal Mortgage Company we will be pleased to help you look at the options and consider these and other important questions. That is our specialty, so contact me and we can go over what’s best for you.

How Can You Use an FHA Loan?

If you're in the market to buy a new house then you will more than likely need a loan. There are multiple types of loans available to you, but we will be discussing one in particular, an FHA loan. This week's blog gives an overview of an FHA loan and talks about what it means to you. When a mortgage is secured through FHA (Federal Housing Administration) the loan is insured from default by the government. What this means is the FHA guarantees to pay lenders if the borrower defaults on their loan. This guarantee allows lenders like us to make available a wider variety of loans to our clients. To be able to insure this loan, the FHA charges a fee. Borrowers who use FHA loans pay a mortgage insurance premium (MIP) of 1.75% upfront. In addition to that, they pay a substantial fee included with each monthly payment.

The Federal Housing Administration offers several programs to promote home ownership. One advantage of this type of loan is normally a smaller down payment to buy a home. People who might otherwise not qualify for conventional loans can qualify for an FHA loan because the qualification ratios are more lenient for FHA loans and FHA guidelines make it easier for people to qualify for a mortgage, but there are some disadvantages. FHA mortgage insurance has become extremely expensive recently and is a very large negative factor regarding getting an FHA loan. If you can meet the more rigid requirements of a conventional loan, this is usually the best option.

We offer multiple loans at Intercoastal Mortgage Company, FHA loans being one of them. As you have read there are advantages and certain disadvantages to these types of loans. If you would like to go over which type of loan would best fit your situation, then contact me and we will go over the differences with you and get you into the home you desire.

What “Home Equity Line of Credit” Means To You

We offer multiple types of mortgages at Intercoastal; we also originate second trusts and home equity lines of credit. Some people may not understand what a home equity line of credit is, or that it may be available to them. You can't use a home equity line of credit (HELOC) on it's own to purchase a house or for proof of funds, but it may be helpful to show you have available credit and your payment history. This blog is about what HELOC means to you and how you can use it to get into the house you want, pay for your child's education, or add that addition onto your house.

Home equity line of credit. What is it and how it works:

A home equity line of credit is a loan from a bank or other lender, which has an limit amount determined by the equity in your home. Yet, this type of loan differs from others significantly.

1. The lending institution establishes the amount of the loan based on the equity in your home. Rather than giving you a check for the amount, they make the money available to you like a credit card.

2. Payment of the amount taken from the line of credit is made monthly. Payments are based upon how much of the loan you have used plus an added amount of interest. While there may be a minimum monthly payment, you are only repaying on the amount you have taken from the account.

3. The interest rate on a home equity line of credit is usually variable. It can change over time because it is based on an index such as prime rate.

4. While there are monthly payments, the loan has a period over which the entire principal must be repaid.

5. A home equity line of credit can be used by the borrower for whatever purpose they deem necessary.

6. At the basis of the home equity line of credit is your home. So, just like a mortgage, failure to pay can result in foreclosure.

7. A Home Equity Line of Credit can be very useful to a homeowner and in some instances the interest is deductible from your income tax.

The best time to apply for a HELOC is when it isn't needed. It will be available to you as credit should you ever need to borrow from it. It is also great for help purchasing a house and we specialize in this. Contact me and we will see if your home equity line of credit can be used to get you into the house you desire.