A common question I get every time mortgage interest rates drop is: "I hear rates are dropping, should I refinance?" And with rates dropping again it's a questions that is asked of me almost daily. So, how do I answer that question?
If your monthly mortgage payment will be less by refinancing then the answer seems obvious, but just because you are saving money does not mean that refinancing is right for you. I believe it's important to consider how long you plan to keep the new mortgage and how much it will cost you to refinance. Let me give you an example. If the cost to refinance is $5,000 and your savings is $50 per month. You would have to plan to keep the new mortgage for 100 months (8+ years) before you would recoup the cost to refinance in your new monthly payment. This calculation does not take into consideration the interest savings on the total loan. There's a link below to help you calculate if refinancing is right for you.
Refinance Savings and Break-even - Should you refinance your mortgage? Use this calculator to determine what your new payment will be, how much you'll save in interest and when you will break even.
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Out with the old and in with the new. New Years brings a fresh start to many aspects of our lives, but some of those new beginnings might not be for the best. In December of 2016, The Federal Reserve increased interest on mortgage rates by 0.25%. The 30-year-fixed mortgage rates also already increased by 0.5% between the presidential election and the December Fed meeting, and will likely continue to climb well into 2017.
Though a 0.25% increase doesn’t sound like much, it can cost homeowners thousands of dollars more over time. For example, homeowners with a 30-year mortgage of $300,000 with a 4% rate will have monthly mortgage payments of 1,578. If that rate goes up by as a little as 0.25% the monthly payments will be $41 dollars higher; a total of $14,760 over the course of the 30-year loan.
Buyers shouldn’t let small increases scare them from buying a home. Here are some precautions homebuyers can take to save money in the long run.
First-time homebuyers might want to consider reducing their target price as the mortgage rates inch up. In order to ensure long-term affordability, homebuyers might think about looking at smaller homes or home with fewer wish-list traits. Another option is delaying the home buying process, and taking the time to save up for a more expensive property.
First-time buyers should also try improving their credit score, because the better the score, the lower the interest rate will be. They should also check their credit reports for errors, try to reduce their debt, and save up as much as possible to put on their down payment.
Current homeowners who are looking to move, might be a bit shocked to see the difference in monthly costs between their current mortgage and their new one. There are things that can be done though to minimize the financial impact of a move. Doing your research on the cost of living in different communities can help, as well as starting the process of moving sooner rather than later.
If you are currently living in the home you want to live in for a while, look into refinancing to a fixed-mortgage rate before the rates increase too much.
It is impossible to predict what mortgage rates will look like throughout 2017, but by doing your research and covering all bases, you can save yourself thousands of dollars in the long run. Christopher Terry is a licensed real estate broker in Ma and RI, has completed the Accredited Buyer Representative Certification, is a graduate of the Certified Distressed Property Institute, holds the prestigious CDPE designation, is a 4-Time winner of the Master Sales Society's 5/50 Award and is the founder of EZ Home Search Real Estate Inc.
Are you a first-time buyer looking in Massachusetts? (A first-time buyer as defined by HUD is ‘An individual who has had no ownership in a principal residence during the 3-year period ending on the date of purchase of the property. This includes a spouse (if either meets the above test, they are considered first-time homebuyers). A single parent who has only owned with a former spouse while married.’)
Do you like saving money?
Has anyone talked to you about the Massachusetts Housing Partnership ONE Mortgage Program?
Here’s the key benefits:
This special first time home buyer program is offer through the Massachusetts Housing Partnership, a public non-profit that supports and finances affordable housing. For more details including program requirements and limitations visit: http://www.mhp.net/one-mortgage/why-one
And when you’re ready for the advice and counsel of a professional real estate broker, call the realtor with two first names, call Chris Terry and E Z Home Search Real Estate. 508-646-4777 X 105. Or Email.
Everyone likes the idea of "Going Green"-- and no, we are not talking about the kind of green they are going in California, Washington and Colorado. We are talking about the kind of green that conserves energy and can save you some real cash. Who doesn't like the idea of saving money and conserving energy?
Solar panels are all the rage right now. How can you resist the sales pitch? Lock in energy costs now and really save in 10, 15, 20 years when energy costs go up, provided the panels are still working and not broken. The problem is solar panels are expensive, very expensive. But no worries! There's a solution for that. You can lease them! And in 20 years you'll own them out right. The panels generate savings on your electric bill and you can use those savings to pay the lease. Sounds like a great deal. Right?
Well, not so fast. There are a couple of things to consider:
How Long Are You Going to Stay in Your Home?
The average length of homeownership is 10 -13 years, so chances are you will be selling before the lease is up. So, then what happens? The lease payments don't just go away. The new buyer will have to be willing to take over the lease payments or you will have to buy out the remaining lease to be able to sell. Not all buyers are going to want your solar panels. Or think about it this way-- 20 years ago satellite dishes were all the rage, but look around at homes today and the large dishes are gone replaced by small, nearly unnoticeable dishes. The same could go for solar panels in the future. Another thing to consider is that a future buyer may not qualify, or may not want to qualify for the solar panels. Energy use is not factored in when qualifying for a mortgage loan but the cost of the lease payment is. It would be added to the debt obligations of the buyer possibility disqualify them for getting the mortgage loan. Even worse, this added debt might not be discovered until far into the sales process.
You Might Refinance
Let's say that you are not going to sell in the next 20 years. Is it possible that you might want to refinance? Maybe take an equity loan? Well, remember that lease payment we were talking about? It is now on your credit report and is factored in to your ability to qualify for a mortgage or home equity loan.
Lease Verses Loans for Energy Improvements
If you decide not to lease you can look into financing solar panels or other energy saving improvements. The Property Assessed Clean Energy Program (PACE) has a program, currently available in 31 states, that allows for the costs of all the energy improvements, including solar panels, to be added to the homeowners tax bill. It's like a loan for the improvements, but the problem is that it is now part of your tax bill. You tax bill supersedes all mortgage loans in case of default. In other words, in case of a foreclosure, the clean energy program bill would be paid before the lender. You can imagine that Fannie Mae, Freddie Mac and HUD are not happy about this. In fact, they have said that they will not finance homes with this type of program. So if in the future you decide that you want to sell or refinance, the only channels for loans have said they will not do them. So, what does that mean? It means you will have to be prepared to pay off the loan yourself.
We are all for going green, just beware that doing so may mean spending a lot more green than expected. Christopher Terry is a licensed real estate broker in Ma and RI, has completed the Accredited Buyer Representative Certification, is a graduate of the Certified Distressed Property Institute, holds the prestigious CDPE designation, is a 4-Time winner of the Master Sales Society's 5/50 Award and is the founder of EZ Home Search Real Estate Inc.
One thing is certain, you can't predict the future. So why are we predicting the future by calling a bottom? And what you we calling the bottom of? This bottom is quite easy to predict. It is home ownership rates. The rate of home ownership has been falling from nearly 70% during the housing boom to 63.9% in the 4th quarter of 2014.
Why are we calling a bottom? There are many reasons but there are two that stand out:
Don't Get Trapped
Don't get caught in the trap so many rents are currently in. If you are ready and willing to become a homeowner, find out if you are able. Contact a professional to determine if you are eligible for a mortgage. If you are not sure who to call we have local mortgage experts who will walk you through the process.
With easing of credit standards and new low to no money down programs you could be on your way out of the renters trap!Christopher Terry is a licensed real estate broker in Ma and RI, has completed the Accredited Buyer Representative Certification, is a graduate of the Certified Distressed Property Institute, holds the prestigious CDPE designation, is a 4-Time winner of the Master Sales Society's 5/50 Award and is the founder of EZ Home Search Real Estate Inc.