Los Angeles Living

 

 

Cash in Refinance.  Nothin' New.  Nothin' Revolutionary. 

By Gene Mundt, Professional Mortgage Banker  -  Chicago Bancorp

     

     The concept of bringing "Cash In" to Closings of a Refinance is nothing new or revolutionary ... but it HAS become more common these days.            

     Why?       

     Home Values have declined in most U.S. housing market regions.  Yields on stocks, bonds, and other investments are dwindling ... and Mortgage Rates are hovering, or under 5%.  (This last statement should be making those Americans looking to Buy a Home or Refinance salivate).       

     If any of the aforementioned scenarios apply to you as a Homeowner, you might presently be pondering "Cashing In" those investments that are yielding you a miserable rate of return and then utilizing those dollars to "Buy Down" your Mortgage Interest Rate, 1% or more.       

     This is a plan of action you might want to consider, especially if "Buying Down" the Interest Rate is the deciding factor in making a Refinance of your Mortgage possible.         

      A "Buy Down" can prove beneficial to a homeowner in the following ways:  

• By reducing the Mortgage Balance to qualify at a certain LTV (Loan-to-Value )
• To qualify for your Mortgage at a lower DTI (Debt-to-Income Ratio) 
• To eliminate costly Mortgage Insurance, while also lowering the Interest Rate 
• To reduce the Principal Balance of your Mortgage in conjunction with reducing the Loan Term (thusly keeping the new monthly Mortgage Payment comparable to the previous mortgage payment, but greatly reducing long-term interest costs) 
• To fit into certain LTV (Loan-to-Value) "windows" on first and second (Combined LTV) Mortgage scenarios.

      There is no across-the-board right answer to these above-mentioned scenarios.  As I've written many times previously in my posts, today's Mortgage Processing and Mortgage Loan is more personalized than ever before.       

      As each borrower's set of financial situations are different ... each situation must be judged on its own merit.  Each decision must be based on the financial scenario and standing of the individual homeowner in question.    

     My suggestion or recommendation would be for the homeowner to consult their Income Tax Advisor and their trusted Mortgage Professional both, prior to proceeding with this type of Refinance.        

     Why?  

     My fear for any Homeowner with capital to invest is this ... How liquid is their money paid into reducing their mortgage?  How liquid is it versus having the money in a Money Market Account?  Versus a Certificate of Deposit?  Versus a Bond Fund, or etc.?       

     For LONG TERM FINANCIAL PLANNING, I personally would bet on the Mortgage Reduction course of action being the favorable one in most cases.  But each homeowner must consider their own level of comfort when making this decision.  As with any financial decision, their is an element of risk ... and homeowners should be made aware of that fact and discuss their options with their financial professionals before making a final decision.       

     All of the above is great "food for thought" ... and at decision time, ultimately  the Homeowner themself may have the only "right" answer regarding how to proceed.           

Gene

 

 

    * If YOU are seeking information and answers as to whether a Refinance might be possible for your financial scenario and property, please contact me.             

     Together we will analyze your current Mortgage and Financial situation ... and then move forward with a course of action that will benefit your personal and financial needs best.  I look forward to speaking with you soon!    

     Gene Mundt:   Direct: 815.277.4036   Cell: 708.921.6331   Email: gene@chicagobancorp.com www.genemundt.com      

                            

www.genemundt.com

gene@chicagobancorp.com

A recent cover of Time Magazine featured the phrase, "Rethinking Homeownership" and dwelled on the downside of owning a home since we have been through some turbulent times.

This is doom and gloom of the worse kind.  A home may not be the ultimate piggy bank that it once was, but does that mean we should become a nation of renters?

Before we turn in our welcome mats and put away the "Home Sweet Home" plaques we may want to look at the opportunity that is here and the reasons to buy a home right now.

1. Quality of Life.  A rental property is not going to give you the standard of living that home ownership will.  Have you looked for a rental lately?  Regardless of the location you are in, you will not find the same quality as in a purchased home. 
2. There are deals to be had.  Yes, it difficult to sell a home right now - and that makes is easy to buy one.  Many buyers have left with the tax credit expiration so the competition is not great for all of the houses that are languishing on the market. Take your pick.  Prices are low.
3. Loans are inexpensive.  As recently as two years ago interest rates were over 6%.  They are now in the low 4's.  That is unprecedented. 
4. Tax Savings - You still have the mortgage interest deduction and can also deduct your real estate taxes. If you sell, you will get a tax break on your capital gains. All these items together make buying a much better deal than renting.
5. It is a forced savings account.  You may end up renting an apartment for a bit less than it would cost to buy a home, but that money is still going out the proverbial window.  With your mortgage payment you are putting that money towards equity that will be there for you when you retire or decide to sell.
6. There is a lot to choose from right now.  With a glut of unsold homes, inventory is well above average levels. This means low prices as well as great choices.
7. Pride of Ownership and Stability.  You can decorate the kitchens and bathrooms exactly the way that you want them to be.  Create an addition.  Finish the basement.  It's yours!

It was once said that homeownership could "change the very physical, mental and moral fiber of one's own children."  Studies have shown that homeownership creates social stability and safer neighborhoods. There is also the fact that children actually do better in school when their families own the homes they live in.

None of this has changed.

So, is this still a good time to own a home? Absolutely!

  

Copyright 2010 "In This Day and Age - What Good is Owning a Home?"

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Claudette Millette, Broker, Owner, The Buyers' Counsel - (508) 881-6230

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A History of The Fixed Mortgage Interest Rate & Why NOW IS THE TIME TO BUY OR REFINANCE!

Prior to the 1930's mortgages were mainly short-term loans with balloon payments.

In 1934 the FHA (Federal Housing Authority) was created to insure mortgage loans, motivating banks to give loans to low-income borrowers with low down payments with interest rates around 6-7%.

By the end of the 1940's and early part of 1950's interest rates were at 5% for a 20 year fixed loan.

In 1944 the VA (Veterans Affairs) loan program was created

In 1948 the FHA stretched out the loan term to 30 years.

From the mid-1960's most mortgages were at 5-6% interest rate, and were funded by large Commercial Banks or Savings and Loans Associations (S&L's) which were insured by the FDIC (Federal Department Insurance Corp)

In 1970 Rates were at 7.5% Freddie Mac (FHLMC, Federal Home Loan Mortgage Corp) was created to buy loans from the S&L's

Late 1960's and early 1970's interest rates climb 

In late 1970's rates rose from less than 10% to 18% in 3 years!

In 1981 the rate hits 18.5% for 30 year fixed rate mortgage and Adjustable Rate Mortgages (ARMs) are offered

Toward the end of 1985 fixed rates dropped to 9%

In the 1990's interest rates fall below 8%

Until the mid 1990's to get a mortgage borrowers had to disclose income and assets, and have good credit scores   - If you did not have these things, i.e. lower income, no assets, low credit scores, one could still get a loan but at a higher rate

2000 30 Year Fixed Rate was 8%

2008 30 Year Fixed Rate was 5%

From 1970 -2010 30 Year Fixed Rate less than 10% for almost 11 years

2000 - 2009 average rate was 6.3%

2009 Disclosure of income and assets plus good credit scores is required to obtain a mortgage. Interest rates keep dropping

***End of September 2010 - Less Than 4.37% 30 Year Fixed  - Less Than 3.75%  15 year Fixed !!!

History has shown that rates can move quickly upward if economic conditions change!

Right now, Fixed mortgage rates are the LOWEST IN HISTORY!

REFINANCE.....BUY IF YOU CAN....DON'T SIT ON THE FENCE TOO LONG!!!

(Most Info found on Wikipedia.  If you have other information please comment!! - Thank you! - Gloria)

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Doug Durren and Gloria Todor, Realtors^®
CENTURY 21 Absolute Realty
Serving Delaware County, Pennsylvania and Surrounding Areas 
610-909-0687 Doug       610-328-4300 x131 Office
484-431-3686 Gloria     Visit our Blog
Email GloriaTodor@Century21.com

 Stay in touch          

The lateral sewer lines
are YOUR responsibility, not the city's

I received an email this morning from a person who bought a home in California a month ago and is now having problems with the sewer line. He had a home inspection which didn't reveal any sewer problems, but after a month he noticed that drainage from the bathtub and shower was very slow. A video scan by a plumber found roots in the main line.

A call to his home warranty company indicated that they don't cover roots in the sewer lines. The previous owner flipped the house, so since he never lived in it, there were no disclosures about any sewer problems. The plumber quoted about $10,000 to correct the problem, although the type of correction was not indicated.

This situation is all too common because most home inspectors don't advise their Clients that the lateral main sewer lines are their responsibility, and too many home inspectors do not "inspect" the trees growing on the property unless they are overhanging the roof or chimney.

It's going to be difficult to prove that someone else knew about the problem, especially since the house was flipped, but I think he might also have a plumber who needs some money with that $10,000 quote to fix the problem. To me, it sounds like he probably has cast iron lateral main lines that the plumber wants to totally replace. In today's world, that's probably not necessary. It's possible now to simply remove the roots and repair the area of damage with an interior lining.

At some point, though, he might need to remove the tree, although I asked him if he knew the tree species or had a picture of the tree. With either of those, I can give him further guidance on whether or not the tree really needs to be removed. Trees add quite a bit of value to a property, so we don't want to remove it unnecessarily.

He might still need to replace the main lateral sewer lines depending on whether or not more damage is found past the area where the roots were found. The video scan probably won't be able to see past that area of roots until they are removed.

I advise my Clients to get three quotes on all work, but in this economy you might find that everyone you get a quote from wants to make as much money as possible, regardless of whether or not the work needs to be done, so be careful. Find trustworthy plumbers via Angie's List, Done Right, or the BBB.

I know that some real estate agents advise their selling clients to run Draino or Liquid Plummer through all the toilets, bathtubs, showers, and sinks before the home inspector gets there. It's not that they are trying to cover up things; it's that they simply want to present the home in the best way possible. By the time the home inspector gets there, enough time has not passed to allow any root problems to manifest themselves again.

If you are a buyer or a buyer's representative of an existing home, especially an older one built more than 25 years ago, you can't go wrong with a video scan of the main lateral sewer lines, and if your property has a lot of big trees, that video scan is worthwhile regardless of when your home was built.

The lateral sewer lines are YOUR responsibility, not the city's. They are expensive to replace, and many home warranties don't cover them because they are concealed. Even though you might get a home inspection by the best home inspector in your area, if you have any concerns about the sewer system, go ahead and pay a plumber to do a video scan of the lateral sewer lines.

Try RusselRayPhotos.com for inexpensive, royalty-free photos.

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Via The Huffington Post and YouTube I saw this hilarious clip of Switzerland's finance minister, trying to answer a serious parliamentary questionsabout "imports of cured meats".

"The video showing Hans-Rudolf Merz convulsing with laughter at the unintelligible bureaucratic language in his script has created popular sympathy for the outgoing finance chief. His speech has been viewed by more than 300,000 people on YouTube and other websites since Monday and prompted one maker of air-dried meats to advertise their wares with the slogan: "Never lose your sense of humor" - AP

I don't understand a single word that he's saying, but his uncontrollable giggling is infectious, and I found myself laughing out loud while watching him. Enjoy!