Balram Kakkar 1173 Views

Thinking about paying off your mortgage early? Here are the positives— and the negatives.

08th Oct 2020 Uncategorized

  If you’ve got years to go on your home mortgage, you have probably dreamed of the day your mortgage is all paid off. And depending on how long your loan term is, you could wait for 15, 20 and even 30 years for that dream to become a reality. But what if you could speed up the process and pay off your mortgage sooner? Should you? For some homeowners, the risks of early mortgage payoff outweigh the benefits. Let’s look at some of the things you should consider before sending that final payment to your mortgage holder. Benefits of early mortgage payoff Paying a mortgage off early frees up a large sum of money every month. A study by LendingTree in early 2020 revealed that Americans hold $10.5 trillion in total mortgage debt, with 62 percent of homeowners carrying a mortgage. Also, nearly a 1/4 of Americans have less than $5,000 saved for retirement. Homeowners could redirect money previously saved for the mortgage into retirement savings. Eliminating a mortgage payment also means you’ll need less income to cover your daily expenses in retirement. How to decide if a property is a good investment Early payoff can also result in paying less in interest during the life of the loan. Also, it can provide homeowners with an asset that could be used when needed. Some homeowners open a home equity line of credit (HELOC), which serves as their emergency fund and can be used for major expenses. Risks to consider There are drawbacks to early payoff, however. The general rule of thumb is to keep three to six months’ worth of expenses in an emergency fund. Paying off a large sum toward your mortgage could deplete your reserves and leave you cash poor in the event of an emergency. Paying …

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There are 4 types of private mortgage insurance

28th Sep 2020 Uncategorized

The type you choose determines how and when you pay What is private mortgage insurance? When you buy a home, you’ll pay for homeowners insurance to cover damage to your home from events like fires, windstorms, or theft. But you also may have to pay a second type of insurance: private mortgage insurance. While homeowners insurance protects you and your home, PMI protects the lender should you default on your mortgage payments. You’ll need PMI if you have less than 20% for a down payment on a conventional mortgage. The lower your down payment, the bigger risk the lender considers you to be. PMI helps offset that risk. Keep in mind that PMI is only for conventional mortgages. This means you don’t need PMI if you have a government-backed loan — including an FHA, VA, or USDA loan. Government-backed mortgages do come with their own costs, though. For example, FHA mortgages don’t charge PMI, but you will have to pay a different type of mortgage insurance premium that comes to 1.75% of your loan at closing. Then you’ll pay an annual premium of 0.45% to 1.05% of your mortgage. If you do need PMI for a conventional mortgage, you’ll choose between four payment methods. 4 types of private mortgage insurance 1. Borrower-paid mortgage insurance Borrower-paid mortgage insurance is the most common type of PMI. With this payment option, you as the borrower make PMI payments. With BPMI, you’ll make monthly payments. You can roll PMI payments into your mortgage or pay separately each month. You may contact the lender once you have gained 20% equity in your home to ask to cancel PMI, but the lender isn’t guaranteed to approve this request. Even if your request is denied, the lender is legally required to cancel PMI once you’ve obtained 22% …

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3 Moves to Make After You Refinance a Mortgage

15th Sep 2020 Uncategorized

There are plenty of good reasons to refinance a mortgage today. Mortgage rates are extremely low that swapping your existing home loan for a new one could save you a lot of money each month. Or, it could help you pay off your home a lot quicker and slash the total amount of interest you pay on your loan. If you’ve recently refinanced, you can now sit back and look forward to reaping these benefits. But you’ll also need to make these important moves. 1. Cancel your auto-pay with your old lender When you refinance a mortgage with a new lender, your old lender doesn’t necessarily get the memo right away. As such, if you pay your mortgage automatically each month, you’ll need to cancel that payment. That way your old lender won’t continue to collect a payment you’re not liable for. Of course, if you do not have your mortgage set to auto-pay, you can just stop writing out those checks to your old lender — it’s pretty simple. But many people have the process set up automatically as they worry about forgetting their payments. If you’re one of them, you will want to cancel as soon as possible. 2. Set up auto-pay with your new lender It is easy to forget to pay your mortgage, or any other bill for that matter, when you wind up with a new payment schedule or your mind is simply occupied with other things. That’s why setting up an automatic payment with your new lender is a good idea. But you may not be able to do so the day you close on your mortgage. It could take a few days to get your account or loan number, so be prepared to sit tight and wait for a payment letter with instructions …

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No Money down, but there is a cost to Refinance

08th Sep 2020 Uncategorized

When you refinance your mortgage, you hardly need to make a down payment like you did when you obtained the initial loan. However, there are still costs involved in refinancing, so you may need to provide cash when you close. How much largely depends on the type of refinance. Do you need to put money down to refinance a mortgage? More often than not, you don’t need to put down money to refinance your mortgage. In the typical rate-and-term refinance, which lowers your interest rate and payments and/or shortens your loan term, lenders generally look for an 80 percent loan-to-value ratio (LTV) or lower and solid credit, not money down. If your LTV isn’t in line with that threshold, however, you may be considering a cash-in refinance, which does involve bringing money to the table. The extra funds in a cash-in refinance can help you lower your monthly payments if you’re shortening the term, get a lower interest rate or bring your LTV to the point where you can rid of private mortgage insurance (PMI). Sometimes, putting money down can help you save more in the long run. For a cash-out refinance, on the other hand, there is no down payment requirement. Generally, lenders limit the amount you can cash out to 80 percent of the equity in your home. How much does it cost to refinance? While in most cases putting money down isn’t necessary, refinancing does come with closing costs. The average closing costs to refinance total $5,000, according to Freddie Mac, and can include: Appraisal fee Loan origination fee Credit report fee Survey fee (if needed for property boundaries) Discount points Title search and insurance For certain refinances, there is a newer fee to consider, as well. For closings after Dec. 1, 2020, Fannie Mae and Freddie …

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Balram Kakkar 1914 Views

30/360 vs Actual/360 vs Actual/365 – What’s the Difference?

27th Aug 2020 Uncategorized

  Are you in search to take out a new loan but aren’t sure whether it’s a good deal? Let us help you break down 3 commonly used interest rate formulas to see whether you’re being offered a good loan or not. What are 30/360, Actual/360, and Actual 365 Formulas Used For? These are three formulas commonly used by many commercial real estate lenders. They are tools to help lenders calculate loans that help measure risk and the potential return on investment. But you can also use them as a borrower to see how much you will have pay over time. Each calculation can result in significant payment variations over time, especially since some loans can stretch into decades. Knowing which mortgage is best for you can help you pick the right loan the next time you need to meet with a lender or borrower. Example Interest Accrual Calculation for 30/360, Actual/360, & Actual/365 Lender Loan Amount Interest Rate Interest Rate Formula Actual Interest Rate Total Paid Interest First $1 million 4% 30/360 4% $214,942 Second $1 million 4% Actual/360 4.058% $218,341 Third $1 million 4% Actual/365 4.003% $215,166 As you can see, the minor differences between each interest rate formula result in difference in interest paid on the order of several thousand dollars, even though the loan amount is the same, and the beginning interest rate is also identical. Let’s break down each loan type now. 30/360 You can calculate accrued interest for a loan using the 30/360 formula pretty quickly. It’s calculated by taking: the annual interest rate proposed by the loan – in this case, it’s 4% divide that by 360. This gives you the daily interest rate: 4%/360 = 0.0111% next, take the daily interest rate, then multiply it by 30 – this is representative of …

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Balram Kakkar 1362 Views

A Family Decision – A Reverse Mortgage

11th Aug 2020 Uncategorized

Consumers need to really understand all of the costs, terms and conditions before applying for a reverse mortgage, and that the ultimate decision made by a homeowner, over the age of 62, should consult with a prospective borrower’s family member or another trusted advisors. An applicant should take a peak  at the requirements of a reverse mortgage and see if they qualify. But also have a conversation with the family as a unit to determine if it is the right move. This kind of transaction can have an impact on the family in terms of potential inheritance in the future. Having children or other family members who are involved with the estate should maintain knowledge of the loan’s key features. Everybody needs to understand that you’re taking out the equity in the home. Heirs or other surviving family members are going to have to pay back the amount of equity that has been taken out of the house along with any interest charges that may have accumulated during the time that the home owner was living in the home. The entire family needs to know about all the moving parts. Prospective borrowers should also be aware of the upfront costs and fees that accompany a reverse mortgage. “If you do move forward with a reverse mortgage, you want to understand what all of those fees are going to be, what you’re going to have to pay and  whether it’s a good fit for your family. Any stakeholders in a decision relating to the financial affairs of a family member would be well-served by “reading the fine print” with any new transaction, and what applies to a reverse mortgage as well. Read about things like origination fees, appraisal fees, things like you are going to have to pay. And if you …

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Balram Kakkar 1136 Views

Buying a Home When You’re Self-Employed

30th Jul 2020 Uncategorized

While being an independent contractor, freelancer or entrepreneur can certainly be a freeing career choice, it also comes with some challenges. For instance, it can make getting a mortgage loan harder. Without W-2s, a consistent salary and an employer to back you up, it’s harder to prove your income as a self-employed professional — let alone show you’re not a risk as a borrower. Are you planning to buy a home or refinance while self-employed? These five tips could improve your chances of approval: Get your finances in order. You’ll need to prove your income through bank statements, invoices, profit-and-loss statements and balance sheets. Be sure they’re ready and organized before applying for your loan. Reduce your tax write-offs. Maxing out your deductions can seem smart, but when a home loan is on the line, it can actually hurt you. The more write-offs you take, the lower your income looks, meaning you seem like a riskier bet. Boost your credit score. Higher credit scores are always more appealing when it comes to getting a loan, so take time to improve yours. Pay down debts, settle any overdue accounts and ensure your credit report is accurate. Bring in a co-borrower. When you add a second borrower to the loan, their income is factored in, too. Make sure you choose a co-borrower with good credit, a low debt-to-income ratio and steady pay. Keep your work consistent. Don’t switch industries just before applying for your loan. It’s best if you’re in the same line of work for at least two years. Getting a mortgage while self-employed certainly has its challenges, but it’s not impossible by any means. Reach out today for more home financing guidance.

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Balram Kakkar 1314 Views

How Long Will it take to close on a home and What to Expect

13th Jul 2020 Uncategorized

Closing on a loan usually takes 6 – 7 weeks in which you can expect to pay up to 5% of the purchase price in closing costs. All your hard work and the stress of buying a home will pay off when you get your keys in your hand on the day of your closing. There is a lot that still happens in between though. Here are some tips to help minimize the stress of closing on your home. One question most people have is, How long does it take to close on our house? If you have cash, you can close within a couple of weeks, but if not the timeline is more like 6-7 weeks if you’re financing your home with a loan. Buyer’s obligations: Your first steps are to choose a title company, Like with our sister company, Search My Title, apply for your mortgage loan, order your home inspection, which we highly recommend even though it is an optional solution, and purchase homeowners insurance. Title search: The title search ensures there are no liens are on the house and checks for other title issues that may be underlying. At the end of this process, the title company issues you title insurance, which protects the your investment and guarantees the title is clear. Loan processing: The lender starts processing your loan application as soon as you submit it with a copy of your signed agreement. The lender will ask for an appraisal to verify the value of the property and check your credit history,your income, and your debt to ensure that you qualify for the loan. This part of the process is called the underwriting. Here you will be asked to submit your tax returns,your bank statements, your income verification, and, other documents to get the process …

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Balram Kakkar 1226 Views

Mortgage rates fall below 3%

02nd Jul 2020 Uncategorized

More conversation from Federal Reserve Chairman Jerome Powell has been seen another historic drop in mortgage rates, which have come to an all-time low under 3%. In two days of testimony to Congress this week the leader of America’s central bank said the economy faces an “extraordinarily uncertain” recovery from the coronavirus pandemic. Infections have been rising rapidly, and many states have stopped their reopening plans. But while Powell raises the concern, the Fed’s policies that have pushed mortgage rates deep into the bargain bin appear to be working some magic on the economy. The housing market is rebounding and could lead the U.S. out of its COVID-19 recession, experts say. How low have mortgage rates gone? Mortgage rates dipped on Tuesday to an average 2.94% for a 30-year fixed-rate mortgage, and that ties an all-time low reached in mid-June, says Mortgage News Daily. For rates these days, it’s “all about the coronavirus,” says Matthew Graham, chief operating officer of MND. “If it looks like the economy can slowly lurch back to business, rates will feel pressure to move higher,” he writes. “If it looks like coronavirus retains the upper hand, rates could continue inching toward more all-time lows.” Today’s dirt-cheap mortgage rates have helped put a fire under the housing market.  Home sales under contract have gone up by a record 44% from April to May, following two months of declines related to the pandemic. This has been an amazing recovery for contract signings, and shows the resiliency of consumers and the pure desire for homeownership. This bounce back also shows the housing sector could lead the way for a larger economic recovery. Fed chief Powell welcomes the signs of recovery, but he says the economy is still fragile. “We have entered an important new phase and have done …

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Balram Kakkar 1293 Views

Mortgage Relief Period that are Federally Backed Just Got Extended

24th Jun 2020 Uncategorized

Some people who are worried about paying their mortgages during this pandemic will luckily get an extended opportunity from the government. The Federal Housing Finance Agency Stated last week that Fannie Mae and Freddie Mac will extend their moratorium on foreclosures and evictions until August 31. If you’re not 100% aware if your mortgage falls under this CARE ACT, the CFPB has a guide for figuring out who owns your mortgage. The change reflects the reality of economic recovery during and after the COVID-19 pandemic. Many industries were shut down for more than 3 months and will take time at least that amount of time to recover. This left employees and employers struggling. Extending the moratorium shows that housing is one of the highest expenses people face each month. If you’re struggling to make mortgage payments, the original opportunity to put your federally backed mortgage in forbearance is still an option. You can request a 180-day forbearance period and later request a 180-day extension on the back of that. Your lender isn’t allowed to charge you any extra fees or penalties for delaying your payments or making arrangements for you to pay back that deferred balance later. You also don’t need to provide any documentation to prove your financial hardship. The extension may also provide a sense of security for renters, who may have access to their own accommodations regarding payments. By taking some pressure off landlords, renters may feel less pressure from them to pay on time and in full.

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