Linda Costanzo's Blog
The Mortgage Bankers Association (MBA) refers to mortgage refinancing as a crucial aspect of all mortgages. This is partly because comparatively, low mortgage interest rates have encouraged homeowners to restructure their financial situations using their home equity. Homeowners should base their refinancing decision on their circumstances rather than mortgage interest rates. Here are tips to consider when considering refinancing your mortgage:
You need to have home equity before you can even consider refinancing your home mortgage. Home values are steadily rising which means that with conventional lenders, you can have enough equity to get a loan. Most lenders will allow a homeowner with at least 20% equity to get credit quickly.
In recent years, lenders have made the requirement for loan approval stricter. Therefore, some consumers with good credit may not qualify for the lowest interest rates. Typically, the acceptable credit score by most lenders is 760 and above. Borrowers whose credit scores are not up to the satisfactory score may still obtain a new loan but with higher fees or interest rates.
Refinancing costs usually take between three to five percent of the loan amount. Borrowers can look for ways to reduce this cost or incorporate it into the loan. The cost can also be rolled into a new loan if you have enough equity. With some lenders, you are likely to pay an interest rate that is slightly higher to balance the closing cost when you take a loan with them. Make sure that you negotiate and ask several lenders so that you get the best fees for your refinancing loan.
Rates vs. Term
A borrower needs to have a goal when refinancing to know the exact mortgage product that is most favorable. If all you want is to reduce your monthly payment to the minimum, a loan with a long-term interest rate will be beneficial. If your goal is to pay a reduced interest rate over a short period, you should consider the lowest interest rate in the shortest term.
Before deciding to refinance your mortgage, determine the break-even point. The break-even point is the time at which your monthly savings have covered your refinancing cost. Beyond this point, your monthly savings belong to you. This also means you know how long it will take before your refinancing makes sense if you intend to sell or move from the home in some years.
Mortgage refinancing can be quite confusing, so you need to be sure you completely understand the terms and conditions. Do your research and also speak to a financial planner to give you professional advice.
If you plan to sell your house, you should be proactive. Because, in most cases, a proactive home seller is a successful home seller.
With a proactive approach, a home seller can find unique ways to differentiate his or her house from the competition. That way, this home seller can boost his or her chances of a quick, profitable home sale.
Now, let's take a look at three best practices for proactive home sellers.
1. Upgrade Your Home's Interior and Exterior
Ensure your house looks great both inside and out. By doing so, you can guarantee your residence will make a long-lasting impression on homebuyers.
When it comes to improving your home's interior, it pays to mop the floors, wipe down the walls and ceilings and perform assorted home interior maintenance. If you need extra help along the way, you can always hire a professional home cleaning company as well.
To upgrade your home's exterior, you should mow the lawn, remove dirt and debris from walkways and perform any necessary home siding repairs. Remember, your house only gets one chance to make a positive first impression. And if your home's exterior dazzles, it will increase the likelihood that a buyer will want to set up a home showing.
2. Conduct a Home Appraisal
What you paid for your house a few years ago is unlikely to match your home's value today. Luckily, a home appraisal can help you set a competitive price for your residence from day one.
During a home appraisal, a professional appraiser will examine your home's interior and exterior. He or she also will evaluate assorted housing market data and use all of this information to provide a property valuation.
After you receive a home appraisal report, you should review the report findings closely. By leveraging all of the report data, you should have no trouble establishing a competitive price for your residence.
3. Work with a Real Estate Agent
If you want to be a proactive home seller, you need to work with a real estate agent. In fact, a real estate agent will do everything possible to help you accelerate the home selling process and ensure you can get the best price for your house.
A real estate agent understands the ins and outs of selling a home and will teach you about the home selling journey. Plus, he or she will learn about your home selling goals and guarantee you can accomplish your aspirations.
Perhaps best of all, a real estate agent is happy to set up home showings and open houses, promote your residence to potential buyers and negotiate with a buyer's agent on your behalf. And if you have home selling questions, a real estate agent is happy to answer them.
There is no need to take a wait-and-see approach to selling your home. Instead, use the aforementioned tips, and you can become a proactive home seller.
Paying off a mortgage early is a dream of many homeowners. By making larger payments on your home loan, you can cut years off of your loan term and save thousands of dollars in interest payments that you can use toward savings or investments. But in an economy that has seen decades of wage stagnation and increasing costs of living, it can often seem like an unattainable goal.
With some planning and initiative, however, there are ways to pay off your home loan before your term limit.
In today’s post, we’re going to talk about three of the ways you can start paying off your mortgage early to avoid high interest payments and save yourself money along the way.
1. Refinance your mortgage
If you’re considering making larger payments on your mortgage, it might make sense to look at refinancing options. Most Americans take out 30-year, fixed-rate mortgages.
If you can afford to significantly increase your mortgage payments each month, you could refinance to a 15-year mortgage. This will save you on the number of interest payments you’ll have to make over the years. But, it will also help you secure a lower interest rate since shorter term mortgages typically come with lower interest rates.
This option isn’t for everyone. First, refinancing comes with fees you’ll have to pay for upfront. You’ll have to apply for refinancing, get an appraisal of your home, and wait for the decision to be made.
But, you’ll also have to ensure that you can keep up with your higher monthly payments. If your income is variable or undependable, it might not be the safest option to refinance to a shorter term mortgage.
2. Make extra payments
An option that entails less risk than refinancing is to simply increase your monthly payments. If you recently got a raise or are just reallocating funds to try and tackle your mortgage, this is an excellent option.
Depending on your mortgage lender, you may be able to simple increase your auto-pay amounts each month, streamlining the process. Otherwise, it’s possible to set up bill-pay with most banks to automatically transfer funds to your lender.
3. Bi-weekly payments or one extra payment per year
Making bi-weekly instead of monthly payments is an option that many homeowners use to pay off their mortgages early. Bi-weekly payments work by paying half of your monthly payment once every two weeks.
The vast majority of homeowners make 12 monthly payments per year. But by switching to 26 bi-weekly payments, you can effectively make 13 full monthly payments in a year without seeing too much of a difference in your daily budget.
This doesn’t seem like much savings in the short term, but let’s take a look at how much you could save over the term of a 30-year mortgage.
On a 30-year fixed mortgage of $200,000 with a 4.03 annual interest rate, you would make a monthly payment of $958.00 and a bi-weekly payment of $479.
Over 30 years of an extra monthly payment, you could save nearly $20,000 on the total interest amount and pay off your mortgage almost 5 years early.
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The rent vs buy dilemma is something that Americans have been facing for decades. Both options have their benefits, and it’s really a matter of timing and preferences when it comes to choosing which is best for you.
However, there are a lot of things to consider before making this decision. So, in today’s post we’re going to break down some of the benefits of renting an apartment and of buying a home. That way you can make your decision with a clearer picture of what each situation looks like.
One thing to note first, however, is that it isn’t always as simple as buy vs rent. Some living situations draw on the pros of each type of living. For example, living in a condo might be a good option for people who want the privacy and independence of owning their own home, but who also don’t have the time or desire to keep up with maintenance.
So, as we compare buying and renting, keep in mind that the features of each are not mutually exclusive.
Renting an apartment
Most people who are living on their own for the first time start off renting. For younger people just out of school, renting offers the first taste of independence without the prerequisites of homeownership.
When you rent your first apartment, you’ll learn the skills associated with budgeting for your monthly expenses, making your rent payments on time, and will start learning some of the skills that it takes to run a household.
In terms of monthly costs, apartments can vary greatly. Depending on where you live (and how luxurious the apartment is) you could end up having rent and utility payments that are much lower or much higher than mortgage payments for a house.
However, apartment leases often come with the benefit of utilities, trash removal, and other expenses built in. They also typically require the landlord to maintain the apartment and the land it sits on.
Live in the northern part of the country and hate shoveling snow? Make sure your lease specifies that your landlord will provide snow removal.
One technique that many renters take is to find an apartment that is small and affordable while they save up for a home. In this case, it’s worth living with fewer amenities if your end goal is saving for a down payment.
But, what if you want to own a home someday but haven’t quite decided where you want to settle down? Maybe your work keeps you moving from place to place or you’ve always wanted to move away to somewhere new.
Renting is typically a better option for those who aren’t quite sure what their plans are for the next coming years. They can have a stable place to live while they figure things out and plan their next move.
Buying a home
Once you’ve rented a home for a while, you might become increasingly aware that you want more space and more control over your home.
You’re also likely noticing how much money you spend on rent each month that is essentially a net loss.
When you buy a home, your mortgage payments might be going to the bank, but someday the money you’ve paid toward that home will be yours in the form of equity. You can then use this as a down payment for another home.
This financial benefit cannot be understated. Since house values dependably increase over time, owning a home is a great investment toward your future.
So, those are the main pros and cons of renting vs buying a home. Think about your circumstances and determine which one makes the most sense for you right now. Then, start planning for the future.