Claire LeBlanc - REALTY EXECUTIVES



Posted by Claire LeBlanc on 9/23/2020

Photo by Precondo via Pixabay

Some mortgage companies offer loans with points. In a nutshell, paying points means paying down the interest rate. One point is equal to 1 percent of the mortgage amount. On a $200,000 mortgage, one point is $2,000. The percentage the interest rate lowers depends on the mortgage company and the market. For example, one point might be equal to a quarter of a percent interest. A loan with 4 percent interest and two points might go down to 3.5 percent interest.

Pros and Cons of Points

If you do pay points, you could get a tax break. Since tax laws are constantly changing, make sure you can claim points if part of your decision is based on the tax break. Other considerations include:

  • If your mortgage is an adjustable rate (ARM), some mortgage servicers only give you the discounted rate until the mortgage rate adjusts. Some may hold the discount rate over. For example, if you have an ARM that starts at 4 percent and you buy two points for a discount of ½ percent, you may lose that discount when the loan adjusts, especially if it changes to a higher interest rate. However, if the bank carries the discount over, the new rate might increase to 6 percent, but your one-half point discount would mean that your new rate would be 5.5 percent.

  • You need additional cash to buy points. If you plan on putting 20 percent down, but you want to purchase points and do not have more cash, you could be less than 20 percent down. However, compare the scenarios to determine which method is better in the long run. If you put less than 20 percent down, the mortgage servicer may charge you PMI, which would negate any savings.

  • You may save more by putting more down. If you put $40,000 down on a $200,000 mortgage, you are going to pay interest on $160,000. If you put less money down and buy points instead, your interest rate will drop, but you may end up paying more for the loan in the long run. Enter the numbers into a mortgage calculator to determine which way you save more.

Scenario

If your mortgage is $200,000 and you put $40,000 down, thus cutting the amount you finance to $160,000, and do not buy points, the total interest you will pay over the length of the loan will be about $115,000.

Using the same scenario, you instead put $36,000 down and buy two points. This drops your interest rate to 3.5 percent from 4 percent. You will save about $16,700 over the life of the mortgage. And, you would have to stay in your house without refinancing for 49 months to break even on your savings. In this case, your $4,000 ends up saving you a net of $13,500 on interest (savings minus the $4,000 it cost you to save).

Before you agree to points or a larger down payment, discuss the scenarios with your accountant or tax attorney to determine which method is best for your situation. If you have to pay private mortgage insurance (PMI), buying points could end up costing you.




Tags: Mortgage   PMI   Points   Downpayment  
Categories: Uncategorized  


Posted by Claire LeBlanc on 6/10/2020

Image by Nattanan Kanchanaprat from Pixabay

Owning a home can be an amazing experience. But interest from your mortgage accumulates over time, leaving you to seemingly pay an arm and a leg to finance your home. But while you may think that paying off your mortgage early is a great idea, that isn’t always the case.

You May Have Other Debt

Paying off your mortgage early can save you on interest costs, but you more than likely have other debt to deal with. If you have other debts — like car loans, student loans or credit card debt — then these should be paid off first. Try to focus on your debts with higher interest rates; these tend to be associated with credit cards. After you’ve paid those debts off, then moving on to pay off your mortgage could be a good choice.

You Don’t Want to Go Broke

Paying off your mortgage may sound great and all, but you must consider all of your expenses, including possible emergencies. Saving on interest is very tempting, but it shouldn’t come at the expense of your emergency fund. You never know when something serious will happen, so do your best to set aside some cash. If you have hefty savings and all of your expenses are accounted for every month, then you can move on to paying off your mortgage early.

Consider Your Future

Many people try to pay as much as they can towards their mortgage, only to find out that they used up all of their money. While they have some big expenses and big life changes that cost money, now they have to save up in order to cover those costs. That being said, it’s best to think about your future before paying more towards your mortgage. Are you planning on having kids? Thinking of going back to school? With how frequent life changes, you never know when you could use money down the road. While it might seem like a great plan to throw money at your mortgage payment, think about your life goals and how your finances fit in that equation.

It Can Be Beneficial

Although we’ve made some points above that suggest that you shouldn’t pay off your mortgage early, it can still be very beneficial to do so. Let’s say your household is doing very well with finances and money is pouring in quickly. If your other debts and finances are taken care of, then paying off your mortgage early can help you save on interest; the larger amount you pay, the more you’ll save on interest. However, this can be a tough choice. Be sure to consider the points mentioned above before paying this loan off early.





Posted by Claire LeBlanc on 11/27/2019

Most homeowners would love to be able to pay off their mortgage early. However, few see it as a possibility when they take into account their earnings and other bills.

 There are, however, a few ways to pay down your mortgage earlier than planned. But first, letís talk about when it makes sense to try and pay off your mortgage.

 When to consider paying off your mortgage early

If you recently got a promotion, have someone move in with you who contributes to paying the bills, or recently got a secondary form of income, you might want to consider making extra payments on your mortgage.

However, having extra money doesnít always mean you should spend it immediately on your home loan.

First, consider if you have a large enough emergency savings fund. It might be tempting to try and throw any extra money at your mortgage as soon as possible, but there are other financial commitments you should plan for as well.

If you have kids who will be applying to college soon, remember that student aid takes into account their parentsí finances. If your children plan on applying to institutions with high tuition, then your equity will be counted against you.

Refinancing to pay your mortgage early

Refinancing your home loan is one option if youíre considering increasing the payments on your mortgage. If you can refinance a 30-year loan to a 15-year loan with a lower interest rate, youíll save money in two ways--your lower interest rate and the fact that youíll be accruing interest for less time.

There is a downside to refinancing. Once you refinance, youíre locked into your new payment amount. So, if your higher income isnít dependable, it might not make sense to commit to a higher monthly payment that you arenít sure youíre going to be able to keep paying.

Thereís also the matter of refinancing costs. Just like the costs associated with signing on your mortgage, youíll have to pay closing costs on refinancing. Youíll need to weigh the cost of refinancing against the amount youíll save on interest over the term of your mortgage to see if it truly makes sense to go through the refinancing process.

Paying more on your current loan

Even if you arenít sure that refinancing is the best option, there are other ways you can make payments on your mortgage to pay it off years sooner than your term length.

One of the common methods is to simply make thirteen payments each year instead of twelve. To do this, homeowners often use their tax returns or savings to make the thirteenth payment. Over a thirty year mortgage, this could save you over full two years of added interest.

A second option is to make two bi-weekly payments rather than one monthly payment. By making biweekly payments you have the ability to make 26 payments in a year. If you were to just make two payments per month then you would make 24 total payments. Over time, those two extra payments per year add up.




Categories: Uncategorized  


Posted by Claire LeBlanc on 10/16/2019

Securing a mortgage can be quite challenging if you do not meet specific requirements and demands made by the lenders. But really, you canít blame lenders or mortgage companies for setting up these rules. Most of these demands are made to ensure the borrower can repay a loan without too much of a problem.

Everyone has one or several bad habits that have affected them or will affect them one way or another. When it comes to securing mortgage though, some bad habits might interfere with that decision. These habits will cast a shadow over your profile, putting doubts in the mind of the lender. Bad habits like any of the ones listed below will affect your chances of securing a mortgage.

Gambling

Gambling is a terrible financial habit that could also be addictive. Betting away some of your money on rare occasions is not enough to affect your chances of securing a mortgage. Taking out credit or a short-term loan to finance your gambling habit, however, will affect your chances of obtaining a mortgage Ė your gambling habit might also make you default on your credit card repayment.  

Personal Debt

Having substantial private debt will most likely cast doubt on your mortgage request. Lenders would be skeptical about your ability to pay back a new loan. Before you go ahead and apply for a mortgage, pay off all outstanding debts and keep a clean savings profile.

Defaulting on payments

Having a history of defaulting on previous loan repayment will reduce your chances of getting a mortgage. Defaulting is the single worst thing you can do to yourself. Lenders would not want to provide a loan to an individual who has a bad habit of defaulting.

Exceeding Overdraft 

Another bad habit that will cast doubt in the minds of lenders is exceeding your overdraft limit. If you donít have an arranged overdraft limit, contact your bank. If lenders go through your bank statement and find your account messed up irrespective of how much income Is in there, they would probably turn down your application for a mortgage.

Late Credit Payments 

Making a late payment on your credit card and other loans is an excellent way to dig your own grave when requesting for a mortgage. A single late payment can mess up your credit score and would remain on your credit history for as long as seven years. 

If you are guilty of any of these habits and intend to secure a mortgage, you need to have a clear record first before proceeding with your application for a loan. If you are worried about whether you will qualify for a mortgage, talk to your real estate agent about your options and use prequalification forms to determine your likely approval.





Posted by Claire LeBlanc on 8/8/2018

Buying a home is one of the more complicated purchases that youíll make in your lifetime. Itís not something that you can just open your wallet, pull out a wad of cash and buy. Thereís a warm-up period for a house hunt. You need to prepare before you even start the process of the purchase. Thereís a lot of different things that you should do to ready yourself to buy a home. Youíll need to organize your finances, find a real estate agent and ready yourself. If youíre looking to buy a home in the near future, itís time to get busy! 


Keep Your Credit Score In Check


Your credit score is so important for so many reasons. The highest your credit score can be is 850 and the lowest it can be is 300. Youíll get a really good interest rate on a home if your credit score is 740 or above. A lower interest rate can save you a lot of money over a yearís time. 

The good news is that you can spend time repairing your score. This will include paying down debt, asking for credit limits to be raised and correcting errors that may be on your credit report. You want to be sure that youíre using 30% or less of your total available credit. As always, if your bills are paid on time, it will help you to keep that score up. Also, stay away from opening new credit cards, as this can bring your score down due to frequent credit checks. 


Put Gifts To Good Use


Whenever you get a financial gift, whether it be for a wedding, a Christmas bonus, or a birthday gift, make sure that you save it for your home purchase. Youíll need quite a bit of capital between closing costs, fees and down payments. Youíll be glad you saved the money once you start the home buying process. Youíll also want to make sure that you have and emergency fund built up. You donít want to buy a home without some sort of a financial cushion behind you. 


Research Real Estate Agents 


Your real estate agent will be your right hand person when it is time to buying a home. Youíll want to know that your agent is knowledgable and can help you in this big decision. Your real estate agent is the person who will help you reach your goals, and you want to feel comfortable with them. Ask for recommendations and do your research.  


Get Preapproved


Sellers love buyers who have been preapproved. This shows that theyíre reliable and financially able to buy a home. A preapproval can be done a few months in advance of buying a home. It will take an in-depth look at your finances including:


  • Proof of mortgage or rent payments over the last year
  • W2 forms for the past 2 years
  • Paycheck stubs for the past 2 months
  • List of all debts including loans and court settlements
  • List of all assets including car titles, investment accounts and any other real estate you may own.


Buying a home is a big deal but with the right preparation, youíll be on the road to success and ready to secure a home purchase.




Categories: Uncategorized  




Tags