Posts Tagged ‘cash out refinance’

Interest Rates lower from Brexit

July 12, 2016

blog-author-clayjeffreys3

Interest rates have moved lower since the Brexit vote at the end of June sent stocks crashing, the Pound Sterling down to lows versus the Dollar it hasn’t seen in decades, and all of the politician who led the Brexit campaign quit. But how much have interest rates actually moved since the Brexit vote?

I’ve kept up with interest rates daily since 2009. Since the Brexit vote toward the end of June, interest rates have only improved by 0.125-0.250%. Based on the number of “low interest rate” stories out there, you’d think interest rates would have dropped by at least a half point and have set new all time historic lows since the vote. Why all of the stories? I think it has to do with several factors:

  • yields on treasury bonds have experienced some major change, but treasury bonds don’t impact interest rates. As discussed countless times on this blog (do a search for “MBS” or “mortgage backed security” in the search box at the top right of the main page of this blog), interest rates are impacted by the movement of mortgage backed security bonds. Those prices haven’t changed near as much as the treasury yields.
  • the big move on interest rates was back in January of this year when interest rates dropped by over a half point from the start of the month until the end of the month. Interest rates have been about at this level for most of the year.
  • why the “low rate” stories now? Well, in January, stories were focusing more on the Spring market, home sales increasing, new construction startups increasing, etc. By the time we approach July, the Spring Market is over, there is a natural lull in home sales (everyone goes on vacation in July), and something is needed to fill the 24-hour news cycle. The Brexit vote along with rates improving some since that vote provided the needed stories.
  • since this is a normal “lull” period in the housing market, marketing efforts can now be turned to potential refinances.

Are interest rates low? Yes, absolutely.

Should one consider refinancing? Of course!

But don’t get swept away by it. You want to talk with an experienced mortgage loan officer who can give you the pros and cons of refinancing. For example, this morning I spoke with someone who wanted to refinance using a 15 year mortgage and pay discount points to get the rate into the 2’s. After running the numbers, his “break even” point on the monthly savings versus the closing costs for the new loan increased when he paid discount points to lower the rate! That wasn’t a typo… by paying discount points to get a lower rate, the amount of time needed to break even increased.

In the frenzy to secure a low rate, be sure to ask questions. Work with a mortgage loan officer who watches for trends and doesn’t hop onto the bandwagon of recent events. Someone who will discuss loan options with you instead of just quoting a rate and asking you if you are ready to get started. If the home you are looking to refinance is in the state of Georgia, contact me today. I can help you get going!

Besides… interest rates aren’t at their historic lows yet. That means there is still room for interest rates to improve.

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How to pay for home renovations

April 19, 2016

blog-author-clayjeffreys3

It’s the spring, which means it is time for a home remodeling project. Here’s the big question… how am I going to pay for that new kitchen?… swimming pool?… addition to the home?… etc.

If you don’t have the money on hand, and there is equity in your home, there are two ways to go about getting money to pay for a remodeling project.

Cash Out Refinance – with interest rates as low as they are, a refinance in general could be in order. While doing the refinance, look into a cash out refinance. Depending on the amount of money being taken out, the interest rate is only slightly higher. The max loan to value right now on a cash out refinance is 80% of the value of the home. For example, let’s say the home appraises for $400,000, and the balance on the current mortgage is $220,000. Taking 80% of the $400,000 value is $320,000. When you pay off the balance of $220,000, then there is $100,000 left over to go towards the project.

You are not required to take the full 80%. Maybe the kitchen remodel is only $60,000, so only borrow $280,000 in our example. There’s no reason to do the full amount if it isn’t needed. The rate is fixed for the life of the loan if choosing a fixed rate mortgage option.

If your current rate is over 4.500%, then this could make a LOT of sense as you could take cash out AND get a lower interest rate. A complete win-win.

Home Equity Line of Credit – this is a second mortgage and a bit of a different option. Let’s say you have some money on hand and are unsure of the total cost of the project. Instead of needing a majority of the money, you may only need a little more than what is in your investment accounts. In a situation like that, then a home equity line of credit (called HELOC) may be the way to go.

Using a HELOC, interest is paid only on the amount being borrowed. You can simply open the line and have the money available, like a credit card, and use the line when needed. The total loan to value of both mortgages combined can usually go up to at least 85% of the value of the home.

A potential draw back here is the interest rate. The rate floats with Prime Rate (determined by the Federal Funding rate). Depending on the amount of the equity line, credit scores, etc., the rate is normally “Prime + 1.” With Prime Rate being 3.25% + the 1%, the HELOC rate would be roughly 4.250%. The rate can go up/down depending on what the Feds to with the Federal Funding Rate. If using a no closing cost HELOC, the rate may be more than “Prime + 1.” One other drawback is the fact most HELOCs come with a prepayment penalty.

How to choose between the two? Here are some things to consider:

  • Choose a cash out refinance if you have a firm idea of the project cost, knowing you will need all of the money (no reason to pay interest on money you take out from the refinance if it won’t be used), and if the interest rate will be about the same or better.
  • Choose a HELOC if you are unsure of the cost of the project, already have some funds available, and have a really low rate on the first mortgage and don’t want to lose that rate by doing a cash out refinance.

Trying to decide what is right for you? Ready to apply and get going? If the home is in the state of Georgia, contact me today. We can discuss the pros and cons of a cash out refinance versus a HELOC and choose the one that is best for your situation. Once this is done, hello new kitchen/bathroom/addition to the home!!

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Financing a cash purchase

October 20, 2015

blog-author-clayjeffreys3

We are currently in a seller’s market, and you are looking to buy a home. You want to be competitive, but you don’t want to tie up cash for 6+ months. After buying a home, the must be on title for at least 6 months in order to do a cash out refinance OR open home equity line of credit.

If there was only a way to pay for the home in cash now, and then get a loan to recoup the cash immediately. There is now!

Buyers who purchase a home within the past six months in cash are eligible to finance the property today. That way a more competitive cash offer can be presented to the seller, and the home buyer can still get financing after they close on the home.

To qualify for Delayed Financing:

  • The new loan amount can be no more than the actual documented amount of the borrower’s initial investment in purchasing the property plus the financing of closing costs, prepaid fees, and points.
  • The loan is subject to the maximum allowed loan to value ratios for the cash out refinance.
  • The purchase transaction was an arms-length transaction.
  • The transaction is documented by the HUD-1, which confirms that no mortgage financing was used to obtain the subject property. A recorded trustee’s deed (or similar alternative) confirming the amount paid by the grantee to trustee may be substituted for a HUD-1 if a HUD-1 was not provided to the purchaser at time of sale.
  • The sources of funds for the purchase transaction are documented (such as, bank statements, personal loan documents, HELOC on another property).
  • All other cash-out refinance eligibility requirements are met.

Wanting to make a cash offer on a home, but not tie up the cash for the next 6+ months? Buying that home in the state of Georgia? If you’ve answered yes to both, contact me today to get started. I can help guide you through the loan process to get you approved for a cash out refinance without the 6 months seasoning requirement.

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Delayed Financing

February 24, 2015

blog-author-clayjeffreys3

Let’s say you found a great deal on a home, but there is a problem. The home isn’t inhabitable… the plumbing was stolen out of the home, so there is no running water… there is major roof damage that needs to be repaired, and the current owner can’t/won’t do anything about it… the home was a foreclosure that now has broken windows, smashed doors, missing light fixtures, etc. In any of these scenarios, a bank would not lend money on the home until the home was repaired and could pass an appraisal inspection.

You are fortunate enough to be able to buy the home in cash, but don’t want to part with the money when the home could be financed at historically low interest rates. Sure, you could buy the home in cash. Then do a cash out refinance after owning the home for six months, but the money is gone for six months. Until now…

With a Delayed Financing loan, a buyer can purchase a home today “as is”, and apply for a loan as soon as the next day. In this scenario, a buyer can make a cash offer, get a quick close, and turn around and get their money right back instead of waiting six months. Here is how you do it:

1. The purchase must have been an arms-length transaction.
2. The cash used for the purchase must be appropriately documented.
3. The new loan amount cannot exceed the cost of buying the home.
4. To prevent fraud, a copy of the HUD-1 from the purchase of the home will be required.
5. A title search must show there is not liens on the property.

If the home meets these criteria, in addition to the normal loan approval process, the buyer can get their money back in weeks instead of months.

Have you purchased a home recently that needed work done before the home would pass an appraisal inspection? Do you want to buy a home like this? If you are able to purchase the home in cash, you can get that money back sooner rater than later. If the home is in Georgia, contact me today, and we can get started!

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Interest Rates at 2014 lows

October 16, 2014

blog-author-clayjeffreys3

This year, interest rates are going to rise“… I know we’ve all heard that over the past several years, but 2014 was to be the year rates finally went up. Well, interest rates have improved and were at their lowest point of the year (so far) on Wednesday. Why is this the case?

First, most analysts thought 2014 would be the end of low rates because the Federal Reserve was exiting the bond-buying business. Over the past several years, the Federal Reserve implemented a Quantitative Easing program known as QE. The third round (QE3) began tapering off at the end of 2013. The Federal Reserve currently plans to end the QE program later this month. This was going to make rates jump into the 5’s.

The end of QE3 was the expected reason rates would rise, but it is typically unforeseen events that impact interest rates. We’ve seen several unexpected events in 2014:

  • Global Economy – There were signs of the global economy slowing at the start of the year in emerging markets such as China, Brazil and India. As the year continued, the economic numbers got worse. China could be at the start of its own housing crisis.
  • Ukraine – The volatility created by the Russian involvement in Ukraine caused sanctions to be levied against Russia pushing its economy to the brink of a recession. These events have also caused a slowing of the economy overall in the Eurozone.
  • Middle East – Instability in the Middle East can cause nervousness in the markets. The rise of ISIS certainly qualifies as instability. When the markets get nervous, money usually flows out of stocks and into bonds. This helps mortgage rates.
  • Ebola – As the Ebola crisis intensifies, there are worries of it impacting the global economy.

When events like this happen, investors seek a safer investment than a troubled stock market. Stocks have lost major ground over the past few weeks. The US Dollar, which was panned mightily over the past few years, is now the safest haven in the market. More bonds are being purchased, and interest rates have improved.

Interest rates are now back into the high 3’s for a 30 year fixed rate loan. If you missed out on your refinance chance, it is back. If the property is in Georgia, I can refinance you into a new low rate. Contact me today to take advantage of this drop in rates before it is gone.

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HARP revamped

October 24, 2011

The government announced changes to the HARP program this morning (October 24, 2011). I know there will be lots of questions about the program and the changes, so let’s try a “Q and A” approach to this post!

* I’ve offset the updated portions of HARP with bold colored text. *

Q: What is HARP?

A: HARP is the Home Affordable Refinance Program, but like characters from the Lord of the Rings, it has many different names including Making Homes Affordable, DU Refi Plus, Freddie Relief, and some even refer to it as the Obama Refi Plan.

Like HARP, Gandalf has many names including Gandalf the Grey, Gandalf the White, The White Rider, Greyhame, Mithrandir, Stormcrow, The Grey Pilgrim, Tharkun, Olorin, Láthspell… you get the idea.

Q: Does anyone qualify for HARP?

A: No. There are two main items that each current homeowner must meet to qualify. First, either Fannie Mae or Freddie Mac must own your mortgage. Second, Fannie or Freddie must have received your loan prior to June 1, 2009.

Q: How do I know if Fannie Mae or Freddie Mac own my loan?

A: Great question! It is nice that Fannie Mae and Freddie Mac have both created a look-up tool to make it easier to find out if they own your mortgage. To use Fannie Mae’s, use this link. For Freddie Mac, go here.

Q: Are there any other criteria to meet in order to qualify:

A: Yes, there are other items that potential borrowers must meet. These include being current on your mortgage payments, no late payments in the last 12 months, a qualifying credit score, and borrowers still must qualify based on their income.

Q: NEW – Are there loan to value limits?

A: No, there are now no loan to value limits to qualify. You can be 200% underwater on your mortgage and still qualify to use HARP. This was previously a major holdup to homeowners qualifying to use this program, and it has now been eliminated.

Q: If I have less than 20% equity in my home, will I have to pay PMI on the new loan?

A: No, you will not have to pay PMI on the new loan regardless of the loan to value/amount of equity in your home.

Q: I pay PMI now, can I qualify for the HARP program.

A: Your PMI payments on the new loan will not go up, but the transfer of your PMI from your current loan to the new loan will require some extra steps. Let your loan officer know if you have PMI on your current loan.

Q: I have a second mortgage on my home. Can I still qualify? Would I have to consolidate into one mortgage?

A: Yes, you can still qualify for HARP, but not by consolidating the mortgages. HARP does not allow homeowners to consolidate loans. The second mortgage company must agree to subordinate behind the new first mortgage. The revamped HARP may allow auto-subordinations to occur, which will make it easier for homeowners to use HARP if they have a second mortgage.

Q: Can I refinance any property?

A: Yes, you can. Primary residence, second homes, and investment properties can all qualify for HARP.

Q: NEW – Can I use HARP with any lender?

A: Yes, you can use any lender to refinance your mortgage. Prior to the loan to value changes from 125% to no limit, homeowners were required to use their current loan servicer to go up to 125%. That is no longer the case.

Q: When will these changes go into effect?

A: Lenders should begin coming out with updated guidelines in the next few weeks. Homeowners can more than likely begin using the revamped HARP in December 2011. The HARP is currently extended to go through the end of 2013, so there is plenty of time to take advantage of it!

Q: I have more questions, and would like to get started. What do I do?

A: If the property is in the state of Georgia, I can help get you started with the refinance process. Contact me and we’ll get underway with the process and answering any additional questions you have about HARP. If the property is not in the state of Georgia, contact a local loan officer/lender to get started.

Like the Lord of the Rings, the HARP has a lot of names and details that go with it. Unlike the Lord of the Rings, it won’t be an grand, epic, and sometimes exhausting 1,000+ page read cover to cover… but both come with a happy ending!

Should I refinance?

August 31, 2010

As you can probably imagine, I’ve heard this question a lot lately. It is a great question – when should one consider refinancing their mortgage?

The first step is to know your current interest rate. If the available rate is a half point lower than your current interest rate, it is worth a 5 minute call to your mortgage consultant. That is all it takes – 5 minutes and you’ll know!

In order to run a quick refinance scenario, I need the following details in order to provide an accurate evaluation of your mortgage options:

  • original loan amount
  • interest rate
  • type of loan
  • closing date

Once those answers are provided, I can run a quick scenario to let you know a new monthly payment, closing costs, and the break even point* on the new loan.

* – “break even point” is the closing costs needed to refinance divided by the monthly savings. That number shows how many months it would take to make back the money it costs to complete the refinance.

Now for the most important question of all – how long do you plan to remain in the home? Why is this question so important – well, if you know how long you plan to remain in the home AND then compare that time line to the break even point, it becomes clear pretty quickly whether or not it makes sense to refinance.

Remember, most people believe “should I refinance” is the most important question to answer. Knowing how long you plan to stay in the home is just as important.  Saving money is great, but not if it doesn’t make sense in the long run. To ensure it is the best situation for you, make sure to know “how much” you’ll save AND “how long” you’ll be saving it.

“Should I refinance”, yes that question has become about as common as “are we there yet” on road trips! If you’d like to know the answer to that question, you know how to find me.

Even though I’ve been asked that question a lot recently, I promise I have a much better disposition than Homer does handling repeated questions!