refinancing

Removing PMI Insurance from your monthly mortgage payment

If you or anyone you know has a loan that has Private Mortgage Insurance attached it can be removed.  This additional cost applies when a home is purchased with less than 20% down.  To remove PMI:

  1. Once you’ve made enough payments to boost your equity to 20% of the original purchase price, you can ask your lender to cancel PMI.  By law, the lender must cancel PMI at this point as long as you have a history of on-time payments.  You can establish that the property value has not declined and there is not a subordinate lien — such as a home equity loan — on the property.
  2. If you can’t get PMI removed at the 20% level, it gets easier once you reach 22% equity (based on the original purchase price).  At that point, the lender must automatically cancel PMI as long as you are current on your payments.  For certain loans defined as “high risk” by the lender, you must wait until you reach 23% equity.

Loans by FHA and VA don’t apply this rule.  Any problems with a lender contact the Federal Trade Commission or our State Attorney General.

Orange County Homes – 2 for the price of One!

It is not just the low interest rates that are bringing buyers to the market, it is that you can practically buy TWO homes for the price of ONE house payment compared to the hot market we had  a half a dozen years ago.  Let’s look back in time and do the math:

Below are two  3,000-ish  sq. ft. homes in the Lake Forest II/Sun and Sail Club community of  Parkwood Estates. 

SIX YEARS AGO: The house on the left sold in a market that was full of multiple offers at a sales price of $850,000 in an era of 6.60% interest rates.  A 20% down purchase would have required a $170,000 cash down payment.  Including property taxes of $708 per month, the monthly payment would have been $5,050 plus HOA and insurance.  (Actually it would have been higher because it was a non-conforming loan rate)

TODAY: The house on the right was offered at $575,000  and just entered escrow yesterday.  The market in this price range  is very hot as well.  If the buyer put 20% down that would only be $115,000 down.  With an  approximate interest rate of 3.47%, and property taxes of $479, the buyer’s (P,I&T) payment would be $2,536 per month.  The new buyer is paying HALF of what the 2006 buyer paid and they also have an extra $55,000 in their pocket.

You can see that right now we have a perfect storm.  Prices are great and interest rates are at an all time low – about half of what they were in the mid 2000’s.  Have you been longing to move out of your crowded surroundings and buy the home you dreamed of?  What if I told you you could select your new home first?  Through my “Select-then-Sell System”, First Team’s teamwork, and Sneak Preview system, I can help you identify your move up home prior to placing your home on the market….and then when we do put it on the market your Grand Opening Open House will look like this: http://youtu.be/39KFlc7Sz8Y

Alternatively if you love the home you’re in, but want to reduce your monthly payments, give me a call and I will help you determine your home’s value estimate and refer you to my mortgage partner to give you white glove service in lowering your interest rate and keeping more money in your pocket.  It’s a win/win! 🙂

Home values rise for first time in 5 years


Here’s a great CNN article I just read that does a good job spelling out what is happening in the market. Home prices hit a bottom and are finally bouncing back, according to an industry report released Tuesday. Nationwide, home values rose 0.2% year-over-year to a median $149,300 during the second quarter…

Click here to read full article

FALL LEAVES BRING FALLING INTEREST RATES

The news in the papers, financial websites, and money blogs this month has us pondering interest rates and refinancing again. First, 30-year mortgage interest rates continue their historic drop, reaching an average low of 4.125 percent. It’s difficult to predict if those rates will continue to go down or start to creep up, but we know one thing for sure:  These rates could mean a lot of savings for homeowners. Then there’s the news about the Obama administration’s plans to help struggling homeowners refinance their mortgages. This program would help homeowners with government backed loans refinance to more favorable terms to keep their homes. Finally, home prices have seen a slight increase this spring – rising by as much as 3.5 percent. This good news means some homeowners may actually have equity in their homes again as the value of houses climbs. All this news about loans and refinancing got us thinking: Is now a good time to refinance your home?  Who Can Refinance?

These days, not everyone can refinance a home – nor does it make sense for everyone to refinance. The main reasons to apply for a refinance are to lower monthly payments, secure more favorable loan terms, or consolidate debt. If you already have a low interest rate, good loan terms, and a manageable monthly payment, you may be better off leaving your mortgage alone. Most people assume homes that are underwater, meaning you owe more than the home is worth, aren’t eligible for refinancing. However, many programs, both governmental and non-governmental, work specifically with homeowners in this situation so they can take advantage of today’s low rates. The standard rule of thumb for homeowners considering refinancing used to be  that, unless you can lower your interest rate by at least one percentage point, the refinance doesn’t pencil out financially. With “No-Cost” loans often available today, this is no longer the rule. If you’ve maintained good credit and would like to lower your monthly outlay, ditch some less-than-desirable loan terms or get out from being underwater, refinancing now might just make perfect sense. Interest rates are at historic lows, and banks are ready to work with refinancing applicants.

Refinancing Advantages

The main advantages of a home refinance don’t change much, no matter the state of the housing  market. There are really three main reasons to seek a refinance. 1. The top reason to refinance is to lower your monthly payment by securing a lower interest rate. Right now, 30-year mortgage interest rates are averaging about 4.125 percent. Rates can go lower if you refinance into a 15 or 20-year loan instead. We don’t know where rates will go in the future, but they can’t get much lower.

2. The second reason you might try to refinance your home is to secure better loan terms. During the housing boom, many homeowners got themselves into interest-only, adjustable rate mortgages.

At the time, this loan option made sense as home values kept rising. In today’s housing market, a fixed-term loan that locks in today’s low interest rates makes more financial sense for homeowners and allows you to pay off your principal balance, not just interest. Now could be an especially good time to refinance if you are in a 5, 7, or 10-year adjustable rate mortgage. You don’t want to get to the end of that loan and suddenly face skyrocketing interest rates. Also, if you’re underwater on your home, any refinancing option that lowers your payment or helps you gain equity in your home is better than your current mortgage.

3. Lastly, many homeowners use a refinance to consolidate debt, either from a home equity line of credit or credit cards. Rolling these debts into your mortgage secures a better interest rate and lowers the total amount you’ll end up paying for these debts in the long run. the refinance by the amount your monthly payment is reduced. The answer tells you how many months it takes to break even.

However, a better way to determine whether now is a good time to refinance is to figure out how much the refinance will save you in overall interest expenses. You want to capture enough savings in interest expenses to offset the closing costs. A lower interest rate can certainly lower total  interest expense, but so can refinancing into a loan with a shorter term – 15 to 20 years, for example. This move can save you tens of thousands of dollars over the life of your loan. A shorter loan term means your monthly payments will increase, but if you can afford the additional cost you can save yourself a bundle of money in the long run.

 Next Steps

Talk to my lending partner, Tom Testerman at (949) 422-4497 to learn about whether a refinance makes sense for you right now. You could save yourself a bit of money right before the holidays arrive – there are only so many shopping days left!

Avoid a prepay penalty in real estate refi

Must-knows when paying off or refinancing home loan :

Refinancing continues to be a hot topic. Many homeowners who are planning to stay in their homes for the long term are trying to find ways to lock in record-low interest rates.

Some borrowers are running into qualification issues for the first time in their lives. They are discovering they do not have enough income to refinance the home they have occupied for the past several years — even though the new loan comes with a lower interest rate than their current loan.

Loan representatives are reporting that their biggest challenge in the past 15 months has been explaining to existing customers that they “can’t even qualify for a mortgage under 5 percent.”

Others are upset because they are facing prepayment penalties on existing mortgages even though they have a flawless payment history and a terrific credit score.

A different wrinkle surfaced recently when a reader brought up an issue that we have not explored for years. She had purchased a home with the proceeds from her previous home plus a small balance that was financed by the owner. Read the rest of the story so you can make sure this doesn’t happen to you: http://lowes.inman.com/inmaninf/lowes/news/135970

A Little-known Strategy for Cutting Mortgage Payments

I read this article while I was down in San Diego at the Orange County Association of Realtor’s Strategic Planning Meeting.  It talks about recasting a home loan.  It has been years since we have done it, but I remember that it was an affordable way of reducing our balance and interest rate at the same time.  Below is a short summary and a link to the New York Times article.

Homeowners looking to lower their monthly mortgage payments and reduce their interest rate may be able to do so without refinancing.  A little-known strategy called recasting or re-amortization is available through some mortgage lenders and servicers, and eliminates the hefty fees and daunting credit requirements of refinancing.

SUMMARY:

Re-amortization requires borrowers pay off a lump sum of the principal amount on the mortgage and asking to have the monthly payments reset according to the original interest rate and loan terms.  The lump sum reduces the principal, so the new monthly payments decrease slightly and interest paid over the life of the loan is reduced.

Lenders typically charge an administrative fee of $150 or more to re-amortize a mortgage; however, borrowers are not required to pay closing costs or submit to another credit check.

Re-amortizing works well for homeowners unable to qualify for refinancing, especially those who are self employed or have low poor credit.

Homeowners consider re-amortizing their mortgage should be aware that some lenders require a minimum amount to be paid toward the principal in the lump sum.  JPMorgan Chase, for example, charges a $150 fee and requires a minimum $5,000 payment toward the principal.

Another challenge is finding a lender, or loan servicer, that offers re-amortizing.  JPMorgan Chase and Bank of America exclude loans backed by the Federal Housing Administration and Dept. of Veterans Affairs, and loans that were sold off and securitized may also need investor approval.

 Read the entire article at:

 http://www.nytimes.com/2011/01/02/realestate/mortgages/02Mort.html?_r=2&ref=realestate

Things to think about before you pay off your mortgage early!

PAYING off a mortgage or even paying down the balance early might seem enticing to most borrowers. There’s the big savings in interest payments and the freed-up cash flow that can result, not to mention the emotional benefit of wiping out what for most people is the largest financial burden of a lifetime.

With interest rates as low as they are these days it may be easier to make those additional payments. But deciding whether to do so requires a careful balancing of math and psychology, financial advisers say.  Read on:

Refinancing – Don’t do a no-cost loan if staying in your home for 5 or more years.

I read a good article in the New York Times about refinancing that I want to pass on to you:

HOME buyers concerned about high closing costs in this tight economy might be tempted by a type of loan that requires no cash outlay in exchange for paying a higher interest rate, especially because rates are already at historically low levels.

But these “zero-cost” or “no-cost” financing deals, as they’re known, could end up costing a borrower dearly over time, some mortgage experts warn.  Read on:

http://www.nytimes.com/2010/10/24/realestate/24mort.html?_r=1&ref=realestate

New mortgage rules coming soon!

Recently, the CALIFORNIA ASSOCIATION OF REALTORS® sent us a large number of updates on the market. The most important of that grouping was an article about new mortgage rules.

Beginning Oct. 1, new rules adopted by the Federal Reserve will go into effect, requiring greater diligence on the part of mortgage lenders and brokers who issue high-cost loans for borrowers with less than favorable credit. The interest rates on these loans are at least 1.5 percentage points greater than the average prime mortgage rate. The regulations, which were finalized in July 2008, prohibit lenders from making a high-cost mortgage without verifying that a borrower could repay the loan in the conventional way, and not through a foreclosure sale.

During the height of the market, subprime lenders often would offer loans without requiring borrowers to provide proof that they could make the monthly payments. In some cases, borrowers used stated income loans, which allowed some borrowers to fabricate annual income figures and buy homes without down payments. Although many believe the Federal Reserve’s new rules represent one of the more substantial efforts on the part of the federal government to combat such lending practices, some consumer advocates are concerned. According to a policy associate at the Center for Responsible Lending, the new regulations do not cover option ARMs, which enable borrowers to choose from several monthly payment options during the loan’s early years.

If you want to learn more about the mortgage changes, read the full article at the NY Times.