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 …

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 …

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 …

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 …

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.

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 …

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.

Why Use An LLC for Real Estate Investments | LLC

25th Apr 2016 Blog

There are a number of reasons why the limited liability company, or LLC, has become increasingly popular for the purpose of owning of real property. The benefits and protections afforded by an LLC often far outweigh the costs and burdens of forming and maintaining an LLC. While each situation is different, there are a number of clear and common reasons to use an LLC over a corporation. One of the most obvious benefits of an LLC, like a corporation, is that it limits the personal liability of its members. However, unlike a corporation, where shares of stock are attachable by judgment creditors, interests of LLC members are not attachable. In an LLC, the owners’ exposure to liability is insulated by the protection of the LLC. Another advantage of an LLC is the benefit of pass-through taxation, whereby the business income “passes through” the business to the owners’ individual tax returns. Pass-through taxation applies to a single member LLC or one formed with two or more members, which are by default taxed as a partnership. Single-member LLCs are taxed as a sole proprietorship, and thus no separate tax return is required. These tax classifications enable real estate owners to avoid double taxation on the income generated by the property and the appreciation in the value of the property upon disposition. Single member LLCs also provide the convenience of not having to file a separate tax return and the activities of the LLC can be reported on Schedule C of the individual return. Furthermore, in a 1031 Exchange, a single member LLC can dispose of real estate held under one LLC and purchase under another and still meet the statutory tax deferral requirements as the transaction is tracked by the federal identification number of sole member and not the identity of the …

What I Learned From One Mistake That Seven Years of College and Law School Did Not Teach Me

15th Apr 2016 Blog

Back in 1988, when I graduated with honors in Economics from UNC Chapel Hill, with a prestigious Morehead Scholarship, I figured I was pretty well equipped to succeed in whatever I endeavored. Thus I ventured out to invest in real estate. A brand new tower was being constructed in Flushing Queens, around the corner from where I lived at the time. I walked into beautifully decorated and arranged apartments with modern furniture and sleek paintings, with a nice lobby and a parking lot with gorgeous looking sales staff. They convinced me that if I invested in a $148,000 condo, after paying the requisite 20% down payment and closing costs and obtaining a mortgage for about $120,000, I would be able to rent the 450 square feet for $1,100 a month and would soon be on my way to real estate riches. They all sounded very earnest and sincere, so I figured they had my best interest at heart. As a result I applied for and got a mortgage from then Green Point Bank at 8% per annum, over 30 year fixed rate amortization, which at that time was a bargain, considering I did not have a full time job or a credit score I was aware of. At the closing, I discovered that my monthly interest and principal payments were $880. With tax escrow of about $150 per month and $230 of common charges per month, my monthly payment was $1,260 per month. After closing, it took me a few months to rent the place for $750 per month, which was the going rate at the time for a studio. Absorbed in the excitement of owning real estate, I had done no homework. I was starting out with a $510 per month deficit on an investment of about $30,000, not …