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.

Locking in a Mortgage Rate

If you're in the market for a new home, you will need to know when the best time to lock your mortgage rate is. When to lock the rate depends solely on individual circumstances, so borrowers should work closely with their lender to make the decision. A borrower can lock in a rate only after the initial loan is approved. However, many borrowers wait until they have found a home to lock. Mortgage rates are currently the lowest they've been in years but this could change within the week, so it's important to take advantage of this and lock in a low rate. In a previous blog we discussed why the mortgage rates are so low, but this will change frequently. In this blog we will be looking at how to lock in the lowest rate possible to save you the most money.

The process for locking in an interest rate varies from one lender to another. You may have a lock-in agreement with your mortgage lender which ensures the interest rate at the time of closing, regardless of the actual rate at that time. This is obviously more important when rates are going up, so you can keep your mortgage interest rate low.

There are a few things to keep in mind regarding a mortgage rate lock-in to help ensure you are getting the best rate:

1. A rate quote is different than a rate lock - a quote has not legally binding and subject to change as the rates change; a rate lock secures that interest rate at the time of closing and is a binding agreement

2. Be organized and prepared; it is best to have a specific property in mind and even better to be close to closing

3. Get the rate lock in a legally binding document, not just a verbal offer

4. Make sure the rate lock gives you enough time to finalize your loan - most are 30 - 60 days in duration

When locking in a mortgage rate, let your mortgage lender guide you through the process. Know your estimated closing date, and try to time your rate lock with that date. If you estimate 30 days to close, find out what the interest rate would be if you locked it for a 45-day period. You can't afford to take more time then you should.

You can save a lot of money by locking in the lowest rate possible to you. The important thing is to get your rate on a day it's low and lock for enough time to close your loan. Interest rates are constantly changing, and currently they're the lowest they've been in years. Intercoastal Mortgage Company can help you obtain the best possible rate for you. Contact me and I will assist you in locking the best interest rate for your loan.

What's the house's value

If you're in the market for a new house there are things you must do before you obtain one. I've gone over the steps of mortgage pre-approval in a previous blog. After you get pre-approved and begin house hunting, you will find the house you want. It will be priced according to what the seller wants, but this isn't always the correct price for that house. This is very common, it's the way of the world to try to get the most for your money, but you shouldn’t have to pay more because of it. You must know the correct value for the house you want before you buy it, the term for this is the fair market value (FMV). By using real estate professionals, mortgage lenders, and property appraisers, you can know the actual value of the home, regardless of the listing price. It is important to establish the FMV, since this price could be lower than the asking price.

Fair Market Value is the price at which the home you are looking for should sell, based on certain criteria - square footage value, assessed value, and a comparative market analysis (CMA). Real estate agents create the CMA by comparing other homes on the MLS (Multiple Listing Service) either in the neighborhood you specify or by the attributes of that particular house. They look at houses already sold as a determination of accurate pricing. The square footage value helps to balance some of the variables houses in the same neighborhood; such as lot size or improvements needed/completed. Assessed value adds a third dimension to give a comprehensive picture of what the fair market value is for a home.

The home sale price is what a buyer must pay in order to purchase a home. This includes the financed amount and the amount of the down payment. In a previous week's blog, we discussed the advantages of mortgage pre-approval. Through this process your mortgage lender will assess your financial situation and calculate a maximum affordable sale price. This indicates what mortgage amount you can realistically afford. Assuming your enter the home buying process with a pre-approved mortgage amount, knowing the fair market value of the houses you are interested in will allow you to align your financial picture with the right property.

It is common for people to think a house is out of their reach because they can't afford the asking price. What they may not know is that with the help of mortgage and real estate professionals, they may be able to own the home they want in their desired neighborhood. At Intercoastal Mortgage Company, we help you secure a loan that can fits your needs, based on your income and budget. Contact me for more information or to follow up on a loan application.

Mortgage rates are setting records

Buying a house right now is very attractive, you're hearing how great of a time it is to buy, but why is this so? In the last two weeks mortgage rates have sunk to historic lows. A low mortgage rate means you spend a lot less money for the same house, and this is because the interest on your loan will be low. A mortgage rate is the interest rate charged on a mortgage. If you're looking to purchase a house, this is great news for you. I'm going to explain why that is true in this blog.

Recently, the average U.S. mortgage rates for a 30-year loan dropped to 3.83 percent. A 15-year mortgage, commonly used for refinancing a home mortgage, dropped to 3.03 percent. Both of these numbers set a low interest rate record for recent times, and it is the second week to do so. To put this in perspective, last year at this time the interest rate on a 30 year mortgage was 4.63 percent. This translates into an increase of nearly 1% of interest for the same house.

What is the reason for this

Mortgage rates are set low to encourage a comeback in the housing industry based on these factors:

1. Mortgage rates normally track the yield on the 10-year Treasury note.
2. The employment rate is down - fewer people with jobs means fewer buyers for homes on the market.
3. US Mortgage Backed Securities (MBS’s) are considered the quality investment with the European turmoil in Greece, Spain etc. This high demand is driving the price of MBS’s up and the yield/rate down; a ‘Flight to Quality’ to the US MBS market.
4. With home prices down, those who can afford a house may be concerned about entering the market right now.

What this means for you

On May 9th, the National Association of Realtors reported that prices for single-family homes were increasing in the first quarter in 74 of 146 metro areas. Increasing home prices is usually a good sign. By the end of March, 22 percent fewer homes were for sale than the same time last year, and home sales rose 5.3 percent in the first quarter. Prices of houses are the lowest they've been in years, and although they are rising, the mortgage rates are not. This is why it is the perfect time to buy.

In this economy, the last thing you're being told to do is spend money. Most of the time not spending would be a good practice, but when you think about the current situation based on all the factors you will see it is the time to buy. Take advantage of these low rates. Contact me here and we will get you into the house you desire.