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LifeSource Mortgage Blog

Flex-Term Refinancing

Shannon Gray - Monday, September 25, 2017

 

 

A common argument against refinancing a mortgage is that it seems like a backward movement, as the clock is “restarted” with a new 30, 20 or 15 year loan. But there’s a way to move forward by refinancing into a new loan without restarting the term. We call this our Flex Term Refinancing program. This can help manage both budget and timeline, potentially producing savings of hundreds each month and thousands over the life of the loan.

 

It works like this: a 30 year fixed rate loan was $407,500 a few years ago at 4.75% interest; the monthly principal and interest payment being $2,125.71/month. After 25 payments, the owed amount is $395,055.05 with 335 months remaining. With a Flex-Term Refinance at today’s rates, a new 3.75% loan can be acquired and structured so that the existing term stays the same at 335 months. Assuming the same balance of $395,055 is financed, the new monthly payment becomes $1,899.19/month. Not only do you reap a savings of $226 per month, but your initial loan term remains unchanged.

 

Whether you want your loan term to stay where you are at presently or if you would like further monthly savings and options by starting a new term, we have the loan product for you to keep moving forward.


 

7 Steps to Buying a Short-Term Rental/Vacation Home

Shannon Gray - Wednesday, July 26, 2017


 

Recently my wife and I purchased a short-term rental/vacation home. Through that experience I came up with 7 steps to assist those considering purchasing a short-term rental/vacation home.

 

1. Determine where you love you to visit and where there are opportunities for short term vacation home rentals.

 

2. Figure out your financing.

 

a. Down Payment: How much will you need to put down? Are you going to use savings for the down payment, will you sell stock or will you take equity out of another property you own?

b. Monthly Payment: What will your monthly payment be including property taxes, insurance and HOA?

 

3. Ascertain the present demand for vacation rentals: Is it a destination where people want to visit? Are there vacation properties there already? Is there an overabundance of vacation rentals? Does the city regulate and/or allow short term rentals?

 

a. How much can you charge? What type of occupancy can you expect? Meaning, how many days of the month can you reasonably expect your home to be rented? What is the total estimated gross revenue?

 

4. Determine the costs in addition to your housing payments. Some of these may include transient taxes, cleaning service, utilities, cable, cleaning supplies, toilet paper, coffee, etc.

 

5. Now crunch the numbers. Take your estimated monthly revenue and subtract your housing payment and non-housing related expenses. Your estimated positive or negative cash flow will help determine if this investment is a worthy risk for you.

 

6. Find your dream home with an experienced Realtor’s help. They should also be able to assist you with determining reasonable estimates for the demand of the property as well as the costs. If the property you are purchasing isn’t already a vacation home you will need to buy furniture and appliances to make your property a “home.”

 

7. Okay, you closed on your property. Set up listings on AirBNB, VRBO and possibly Flip Key. You’ll want great pictures and good description of the area and your property.

 

To dive a little deeper and obtain further info, including the pre-approval process, please reach out to us today.

 

Change is in the Air

Shannon Gray - Monday, July 18, 2016


 

Repair. Improve. Upgrade.

 

Have you noticed? Construction crews seem to be everywhere lately. With real estate values up and the economy performing relatively well, many homeowners are looking to spruce up their homes, rather than selling and buying another home. Steven Thomas, a California Real Estate Broker who follows Orange County real estate trends, states that the average selling turnover rate for an Orange County home is 23 years!! He attributes this to a variety of factors including low ownership rate among millennials and a lack of new construction due to limited vacant land.

 

Also, many homeowners choose to make home improvements rather than deal with the sale of their current home and finding another to their liking. However minor, many updates can still hurt the pocketbook. Don’t have the cash to pay for them? With rates still at extremely low levels, you may elect to take a little equity out of your home via a cash out refinance and reinvest the extra proceeds into improvements to your home. Not only will you get to enjoy such improvements, but will typically see the value of your property increase as well.

 


 


Piggyback Mortgage

Shannon Gray - Wednesday, June 22, 2016

Piggyback Mortgage

 



Are you looking to purchase or refinance a home and would like to finance more than 80% of the value of the property? More options are becoming available. In addition to loans with Private Mortgage Insurance (PMI) or Lender Paid Mortgage Insurance (LPMI), some borrowers now have the option of adding a piggyback 2nd mortgage to avoid PMI. This option is often referred to as an 80/10/10. Let’s say you’re purchasing a home for $500,000 and you have $50,000 (10%) for a down payment. In this scenario you would finance $400,000 on a 1st mortgage, $50,000 on a piggyback 2nd or Home Equity Line of Credit and put 10% down. The Home Equity Line of Credit offers flexibility that traditional closed end mortgages do not. Like a credit card, you only pay interest on the money that is outstanding on a Home Equity Line of Credit. If nothing is owed, no interest is due. If $25,000 is owed on a $50,000 line, you will pay interest on $25,000 and still have another $25,000 available to you during the draw period. Draw periods are typically 10 years with another 20 years to pay off any balance due after the end of the draw period. The interest rate is adjustable so you need to be aware of the risks that come with it. If used properly, this financing method is an excellent tool for many to achieve their real estate and financial goals.


Will Mortgage Interest Rates Increase?

Shannon Gray - Wednesday, June 22, 2016

The Federal Reserve members are showing strong indications that they will begin to raise the Federal Funds Rate in December, which has held the effective rate at zero for seven years.

 

Many people are confused as to the Fed’s impact on mortgage interest rates. While the Federal Reserve members do influence mortgage rates, most mortgage programs and rates, such as the 30 year fixed, are not directly tied to the Fed’s decisions on the Fed Funds Rate. Market forces and other factors such as inflation and economic data impact long-term mortgage rates. With positive economic news regarding the labor market and a few signs of mild inflation, mortgage interest rates have begun to slowly rise. The Federal Reserve will move to slowly increase the Federal Funds rate which, again, does have an effect on mortgage rates, but there is not a direct correlation.

 

If you have an adjustable rate mortgage you should be aware of the impact of the Federal Funds Rate on your mortgage interest rate and payment. This is especially true with a Home Equity Line of Credit where the interest rate is tied to the Prime Rate. As the Fed’s begin to raise rates, these loans will increase in lock-step with the Fed Funds Rate. Another common index used for adjustable rate mortgages, LIBOR, while not in lock-step with the Fed Funds Rate, usually tracks the Fed’s movement. Homeowners with these types of loans can expect their payments to increase in 2016.


While most economists predict mortgage interest rates will increase from our record low levels, fixed rate mortgages will not move in lock-step with the Fed’s movements and barring any unexpected news, the rise in mortgage rates should be gradual. It’s a good time to contact me to review your current situation to make sure you are in the best loan for your situation.



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