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Considering a Short-Term Mortgage

It wasn’t that long ago that a 15-year mortgage was considered a fringe product, suitable for a relatively small number of buyers and homeowners looking to refinance. But no longer. In fact, according to Freddie Mac, almost one-third of all mortgages refinanced during the first quarter of 2012 replaced their 30-year mortgage with a shorter-term loan.

One downside to 15-year mortgages is that your monthly payment can be significantly higher because of the additional principal you are paying each month — averaging twice what you would pay on a conventional 30-year mortgage. For many, the extra payment is simply not doable. But for those who can afford it, the long-term savings can be significant.

The recent trend toward shorter mortgage terms stems from several factors.

Debt reduction. Many households are looking for ways to reduce their debt, especially in light of the drop in house prices, which has left nearly one-quarter of American homeowners under water with their mortgages, according to CoreLogic.
Low rates. Rates on 15-year mortgages are at all-time lows, and the differential between 15-year rates and 30-year rates is greater than ever. According to Freddie Mac, the average rate for a 15-year mortgage, as of August 23, 2012, was 2.89 percent, compared with 3.66 percent for the average 30-year mortgage. That’s a 77-basis-point difference. Historically, this spread has been much smaller, averaging 48 basis points for the 20 years ended December 31, 2011, and as low as 31 basis points as recently as 2007, according the Freddie Mac Primary Mortgage Market Survey.
Earlier payoffs. Perhaps most alluring for consumers is the prospect of paying off their mortgage sooner — and saving thousands in interest payments in the process. For example, on a 30-year, $100,000 mortgage at 4 percent, you would pay $71,870 in interest over the life of the loan, while a 15-year mortgage of the same amount and rate would cost you only $33,144 in interest — a savings of more than $38,000.

Whether you go with a 15- or 30-year mortgage, remember to factor in points and closing costs. Also consider how long you expect to own the property. Your financial advisor can work with you to weigh different mortgage options and help you decide whether a 15-year mortgage is right for your situation.

By Perspective Financial Services|2019-08-14T14:00:16-07:00October 10th, 2012|Current Affairs, Financial Planning, Real Estate|

Better Business Bureau Names Top Scams of 2011

Better Business Bureau investigates thousands of scams every year, from the latest gimmicks to schemes as old as the hills. This year, they have divided scams up into nine major categories (from jobs and dating to phishing and identity theft) and picked the top scam in each.

The year’s top financial scam centered on mortgage relief programs. According to BBB, “In challenging economic times, many people are looking for help getting out of debt or hanging on to their home, and almost as many scammers appear to take advantage of desperate situations. Because the federal government announced or expanded several mortgage relief programs this year, all kinds of sound-alike websites have popped up to try to fool consumers into parting with their money. Some sound like a government agency, or even part of BBB or other nonprofit consumer organization. Most ask for an upfront fee to help you deal with your mortgage company or the government (services you could easily do yourself for free), and almost all leave you in more debt than when you started.”

Click here to read the full list: Better Business Bureau Names Top Scams of 2011.

By Perspective Financial Services|2019-08-14T14:00:22-07:00January 12th, 2012|Current Affairs, Real Estate|

Getting Ready to Sell Your House

While most experts see little good news in 2011’s housing market, economic downturn is no reason to neglect maintenance on a home or lose sight of future plans to relocate.

The critical issue is planning intelligently for what spending you do now to make sure it’s worth your money later. Even if your plan to sell is more than a year away, it’s a good idea to get your overall finances in order now. As you wait for your opportunity to sell, here are some ideas to incorporate in your planning:

Get a home inspection: Go through local channels – lenders, friends, real estate professionals you trust – to find a licensed home inspector who can look over your property and help you develop a list of potential repairs and upgrades that you can do economically given that you’ll have months before you put the property up for sale.

Don’t overinvest in improvements: In the 1990s, spending $40,000 on a kitchen in many neighborhoods could recover that amount of money and more in the final sales price. In today’s market, those payoffs are a distant memory. Remodeling Magazine’s latest “Cost vs. Value” report provides estimates on specific projects by region, including projections on cost recoupment.

Appeal your property taxes: If you’ve never appealed your property taxes before or have not done so in many years, do so when your appeals period is open. Lowering your taxes as much as possible may help make your property more salable.

By Mike McCann|2019-08-14T14:00:26-07:00January 10th, 2011|Current Affairs, Real Estate, Taxes|

The Upside to Low Interest Rates

It is no secret that with interest rates at historical lows, our savings accounts at the bank are receiving no interest at all. Because of our weak economy, CD rates are not very exciting, and it does not look like interest rates will be going up dramatically any time soon.

Still, there is an upside – borrowers have the opportunity to take advantage of these low rates. If you have a fixed-rate mortgage that you have been in for at least five years, for example, it may be worth looking at refinancing that mortgage. Rates have dropped a good amount in the last five years; refinancing could save you thousands of dollars of interest if the conditions are right.

Here are a few questions to help determine if it is a good move for you:

Do you plan to stay in your home for at least another five years?
Do you have equity in your home?
Do you have an enough liquidity to pay closing costs?
Are you current on your mortgage?
Do you have a second lien/ mortgage (HELOC)?

If you answered “yes” to all of the questions above, the prospect of refinancing your mortgage is worth a closer look. Your financial advisor can help you further evaluate your particular set of circumstances and options.

By Patrick Eng|2019-08-14T14:00:27-07:00October 6th, 2010|Financial Planning, Real Estate|

Make the Most of Home Renovations

It’s a much different picture renovating a home in 2008 than in 1998. Fueled by huge gains in the price of real estate, homeowners a decade ago were tapping home equity with little care since prices were expected to keep climbing, more than covering the cost of such improvements.

Today, with the slowdown in real estate and the widening damage in the subprime loan market, home prices are stagnant in most markets – and falling in others. Lenders tend to be a lot choosier these days about who to do business with. You need to make the most of home renovations. So before considering a project, it makes sense to make sure your financial house is in order:

See what kind of payoff your renovation will have:

During the housing boom, people thought virtually any renovation would offer big returns. That wasn’t true then, and it’s particularly untrue now. Take the time to figure out what renovations have the best chance for return on investment now – go to Remodeling magazine’s annual Cost vs. Value report online (http://www.remodeling.hw.net) and check 2007 project cost averages for your region of the country. In this market, renovate because it’s going to bring you comfort or pleasure, not because you’re expecting immediate profits.

Know how long you’ll need to stick around:

When you sell, remember that most married couples can exclude from their taxable income up to $500,000 of gain and most individuals filing single or married filing separately can exclude up to $250,000. You must have owned and used your home as your principal residence for two out of five years before the sale. The exclusion is generally applicable once every two years. However, if you are unable to meet the two-year ownership and use requirements because of a change in employment, health reasons or unforeseen circumstances, then your exclusion may be prorated.

Beware the bump in property taxes:

The great thing about a more valuable home is the potential higher value when you sell. The bad thing is a visit from the county assessor – more valuable property tends to lead to higher tax assessments. Make sure you not only can afford the cost of renovation, but also the higher taxes if your home is reassessed.

Make sure your renovation makes your home salable:

A discussion with a real estate agent or someone familiar with the value of improvements in your immediate neighborhood can tell you what will add to value or take it away. For instance, a big addition can take away from the value of a home if it is not aesthetically in tune with the rest of the neighborhood. Obviously, any renovation that keeps your house on the market longer better be worth it now because it might damage your sales prospects later.

A portion of this article was produced by the Financial Planning Association and provided as a courtesy by Perspective Financial, a local member.

By Perspective Financial Services|2019-08-14T14:00:35-07:00January 19th, 2008|Real Estate|