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Should You Refinance Your Home Loan?

Should you refinance your home loan, pay off your home or buy another? Should be the first question you and your spouse ask yourselves before you decide to refinance your existing home loan.  

It takes skills to purchase a home or ask, should you refinance your home?

Recent reports show that some homeowners are borrowing to the constant enticement of lower home loan rates. And, without an analysis, find that they are backing themselves into a corner of more years and more costs on their loans, including more escrow cost and higher points. The savings they “thought” they were getting on a home refinance, turned out to be huge loss.

After you purchase a home, within a few months most new homeowners will get a barrage of snail mail suggesting you refinance your nearly new home.

The reason why you will be encouraged to refinance many times after the purchase, is because of profits for mortgage companies. Just remember, your home is not an ATM machine, it is best to ignore those offers for several reasons.

When you refinance a mortgage, companies collect a whole list of payments from your refinance, as with your original loan. Refinances wildly benefit the mortgage company but can hurt you badly. In fact, the people who do not get this memo may end up purchasing their own home 3-4 times during their lifetime when refinancing.

It is Not Wise to Refinance If:

-Your purchase is new ( less than 5 years old)

-There have been years of payments on your home, the focus – pay it off

-You are not going to save enough money to make a difference 

-Your home has been refinanced before

-The difference in the interest rates are small

-You will add another round of escrow cost

-You will get higher points to offset the so-called lower interest

-You are going to add years to your existing loan, losing the years you have paid

women deserve home ownership or know when to refinance your home
It Is Wise to Focus on Paying off Your Existing Loan:

-So you can focus like a laser beam and live mortgage free with a paid off home.

-If you continue to have a payment after several years, your payment will go down in regard to inflation.

-There are many tricks in refinance loans, because of this you can make big mistakes and increase your chances of lost.

-If the difference of total money saved and new interest rates are too small.

-When you don’t have the expertise and cannot do research to understand the loan process first.

A True Story About a Refinance Loan That Worked

I counseled a woman and her husband, who wanted to know if they should refinance their home, due to a decrease in her husband’s salary.

Here is The Analysis We Did:

1. We obtained her original loan documents and discovered her original and current loan was 33 years. They did not know this; they were told it was a 30-year loan. And because it was stated in months, they did not bother to calculate it.

At the time of the analysis they had 23 years left on her original loan.
With a new 15-year loan, she will shave 8 years off her original number of loan years. This includes the years from the remaining:
23 years (original loan) – 15 years (the new loan) = 8 less years to pay a mortagage in total, with the new loan.

2. They original loan interest was 6.7%. The interest rate on the new loan was 3.8% for a 15-year loan.

So, now they has 2 out of 3 major factors that will decrease the cost of their loan. The cost will decrease by both significant interest rate and number of years. Because of this she will not lose money in the refinance but will instead save money, lots of money.

3. Their payment will go from $3400, Principle+interest+taxes+insurance, to $2400. They will pay $1000 dollars less a month in payments. Coupled with the decrease in years, this is a real winner and takes a financial burden off the family.

Why Did the Above Mortgage Example Work?

The above 3 facts are called being in the right place at the right time.  It was  right because the low interest rates intersected with the savings from years.

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They saw the savings and went with the new loan. Also, 5 years later, she had enough money after their finances improved, to pay off their new loan. Now, they live loan free and shaved 10 years off their mortgage.

This is one of a few cases I analyzed where it made sense and saved money to refinance. In most other cases, the refinance costs, coupled with years lost, do not make a new loan cost effective. Usually, the hidden costs are huge.

Considering the continuing low-interest rates on home loans, is it time for you to consider purchasing a home? — Or refinancing your existing home? Some homeowners are said to be refinancing their existing loan over and over.

If you are in the market for a new home, one of the best times to purchase a primary mortgage is when interest rates are low. Also, you need to find a reasonably priced home. But as far as refinancing, in my opinion, I do not feel that many of the constantly refinancing homeowners understand all the facts (and high cost) surrounding home refinancing. 

quote: Many good things in life are free, refinance your home is not free, contact lois

A one-time refinance is appropriate if you have done your homework and analysis, before you contact a mortgage broker. Then you know that a refinanced loan will be a benefit to you.

If you do not correctly answer the question, “How does refinancing work?” before deciding to refinance, you could get yourself and your home loan security at risk. Know for absolutely,  if you should refinance your home loan. 

Refinancing an Existing 30-year Loan

1. Each time you refinance to a new 30-year loan, you can go over your 30-year period to 40 years, 50 years and sometimes 60. If a homeowner does this every 5 year for 20 years, then at the end of 20 years you will have 30 years left to pay on your mortgage. Instead of 10 years if you did not refinance your original loan.

The extra years of interest and principle will substantially increase the amount of money you pay on your mortgage over time. And this will increase the actual cost of your home.

The Solution:
 

-Calculate how many years you have already paid on your home loan.

-Look at the number of years on your new prospective loan

-Compare the interest rate of your old loan to your new loan

-Find out the total cost that will be charged to you for the loan, by the Mortgage Broker

-If you have a 30-year loan with 15 years left to pay. Then try for a 10-year loan if the interest rate is very low. There should be a significant difference between your existing interest rate and the new interest.

-Make sure every loan you get has no pre-payment penalties. Also, pay extra to principle each month to make sure you don’t go over the 30-year mark. Paying off any mortgage loan early can save thousands of dollars.

Money quotes by Lois Center- Shabazz and

The Purpose:  

The issue becomes, “Why are you getting the refinanced mortgage in the first place?” Are you desperate for money to use for medical purposes, college, or some other dire emergency?

Or, are you looking to save money on your overall cost and either put the extra savings into a general savings account, retirement? Perhaps you want to retire earlier with no mortgage, pay down other bills, or lower your existing payments due to financial stress? And Does refinancing your home work or hurt you?

These are questions you must answer and make your intentions crystal clear to yourself and your spouse before you decide to refinance.

How Much Will it Cost to Refinance Your Home Loan?

It will cost you a hefty sum of money each time you refinance your existing home loan or purchase one for a new home. And even the so-called no-cost loans will cost you. The purchase price of a new loan is either 2%-4% of the new loan. In the case of the no-cost loans; the fees are added into your loan as a higher interest rate on monthly payments.

You will, therefore, pay for the cost included in your monthly payments. It can take as long as four to six years to pay off the cost of your home refinance, so plan to stay put for a while if you choose to refinance.


Understand the Secrets to Buying a Great Home, Before You Start >


Home Loan Resources for Primary and Refinance Loans

There are several resources to help you make a wise decision when it comes to choosing a loan for a new home. Understand how detrimental repeatedly refinancing your existing home can be. Refinancing your home should be a rare consideration and carefully calculated decision before you visit a mortgage company.

Credit unions and your local banks offer the best solutions for a mortgage. If you do not have optimal credit and money saved in a bank or credit union then carefully select a mortgage company.

The U.S. Department of Housing and Urban Development offers numerous resources on its Web site, www.hud.gov, for homebuyers. It publishes an eight-page booklet, “Looking for the Best Mortgage,” which offers advice on finding the best deal. General tips include:

1. Contact several mortgage lenders
and brokers for information.

Check hsh.com to see what the average mortgage rates are now.

3. If you have a good relationship with your local bank, start with them. Especially if you have a substantial saving or checking account with them. The mortgage division is usually a separate business in your bank, but a relationship with the bank will make getting a mortgage easier.

4. Obtain all cost information, including interest rates, points, fees, down payment requirements and private mortgage insurance.

5. Negotiate your mortgage where possible. Mortgage deals vary from day-to-day. Once you find a deal you like, lock it in.

6. Federal law prohibits discrimination in mortgage lending, know your rights.

7. Understand your credit. If it’s not good, finding a loan could be difficult. To obtain a copy of your credit report, contact free credit report .
You should know your credit score and examine your credit report before you shop for a refinance.


Contact Me For a Free Personal Finance Consultation in Home Buying>


Sometimes credit reports have mistakes on them and they can be taken off by contacting your credit reporting agency in writing, before you shop for a loan.

The primary goal for you is to make sure you answer the question thoroughly, “Does refinancing your home work?”.  know should you refinance your home or buy a new one.

The More You Know, The More You Grow – Your Finances

MsFinancialSavvy, Lois Center-Shabazz
Lois Center-Shabazz| Money Strategist | Course Delta Agency

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3 Best Factors to Consider In Order To Buy a Great Home

There are many reasons you should buy a home. This article applies to owner-occupied ownership when you buy a home, only. Rental real estate is quite different than owner occupied home ownership. I will walk you step-by-step through key elements of the home buying process.

The loans are more difficult to qualify for than owner occupied. Tax deductions are much treated differently. If you do not hold home investment long enough, you could be required to pay short-term capital gains taxes. These home buying tips will enable you to understand the most important elements of home buying you should know before your search.

Home buying the right way take skill

 

The More You Know, The More You Grow In Useful Facts


Here Are 3 Factors to Consider Before You Purchase a Home:

1. Home prices are low or reasonably priced for your area, which makes the area affordable

Home prices fluctuate about every 7-10 years. Occasionally, due to a catastrophic event where there are a lot of foreclosures, the prices go way down. When the event is over, and people are back to work the prices usually go back up.

Money quotes by Lois Center- Shabazz and

The prices fluctuate from low to high for several reasons. Some of the reasons are:

1) If there is a big layoff in a town, everyone is trying to sell at the same time and there are few buyers, home prices may take a nosedive.

2) A major industry has moved out of a town and there are few buyers for a home, prices will go down, 3) Interest rates have spiked up and it is hard for buyers to qualify for a mortgage and therefore prices of homes may correct down.

On the other hand, prices go up sometimes when:

1) Loans are easy to qualify for (as in the real estate crises from 2003-2008), and people got loans who should not have them, this causes many loan defaults in a short period of time.

 2) A new high paying company may move into the area and there is a shortage of homes to buy, people start bidding up homes, as in some areas of the U.S. that have high employment and low inventory of homes.

3) New homes are not being built, and new companies move into the area quickly, so there is a shortage of homes.

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You get the picture. Real estate does not go up constantly, as some beginner home buyers tend to think, there are sometimes corrections in a high market, and low markets go high for various reasons.

Never Rush to Buy a Home:

The point here is that you do not want to rush and buy a home in an area that you are not familiar with; the prices may be high and at the top of a market. For reasons unknown to you, prices are starting to come down.

This is important to know because, if you must sell in a short period, you may have to sell for less than you paid for the house. This is called, being under water with a mortgage, you will lose money.

Typical appreciation for a well-kept home usually runs around 3-5% per year, according to the National Association of Realtors.

Know what is going on in your area, make sure you are not buying at the top of a market, unless you know you will be in the area for a long time, otherwise, you could be stuck with a home you can’t sell for more than you paid.

You Will Have the Best House, for The Best Price Possible, if You Follow the Home Buying Process; When You Buy a Home.


2. Buy a home when you have had a steady job for a while.

It goes without saying that income is what pays the bills. Make sure that the company you work for is stable or your business is on sound footing before you buy a home with a mortgage.

Most mortgage companies will want to see 2 years of tax statements, in addition to that. They will usually also order their own copy directly from the Internal Revenue Service. If you are self-employed, agents will ask for  actual bank records of your small business deposits.

During this time also make sure you have savings in place for a down payment, and escrow and closing cost. It is also a good idea to have additional savings to keep in place in case of a job layoff.

3. Buy a Home when you plan on living in the area for several years.

As I discussed in number 1, real estate goes up and down. When prices get high, many times there is a correction and prices come down for a while.

If you happen to NOT do your homework and buy in a real estate market that is about to come down, for a variety of reasons, you may find yourself upside down with your loan for a while.

This will take more years to make a profit on your loan. You will have to ride out the correction, and get back your escrow and closing cost as an initial investment. Normally it takes about 4 years just to get back your escrow and closing cost as the home value increases.

Corrections in the Real Estate Markets:

If you must ride out a correction it could take many years longer. If you happen to buy at the bottom of a real estate market, you could get lucky enough to ride up the value of your home, and you could sell much faster or a profit. It is important the house is well-kept and affordable for you.

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 In any case, you should study your area, study the real estate market, study the economy or the changing of the economy in the area, and know when to buy. That is; know if you are at the bottom or top of a market. Real Estate works best when it is held long term, a key factor in home buying tips.

In normal cases, it could take as long as 8-10 years to make a profit from your real estate purchase. Use this calculator to find out the home you can afford.

This will take more years to make a profit on your loan. You will have to ride out the correction, then get back your escrow and closing cost as an initial investment. Normally it takes about 4 years just to get back your escrow and closing cost as the home value increases. The home buying process tighly weaves, escrow, title, costs, mortgages and time. 

In any case, you should study your area, study the real estate market, study the economy or the changing of the economy in the area. And know when to buy, that is; know if you are at the bottom or top of a market.

Use all of these great home buying tips to buy a great home, but first understand the home buying process.

Home ownership dream for women

Lois Center-Shabazz| Money Strategist | Course Delta Agency

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3 Best Factors to Consider When You In Order to Buy a Great  Home

A Word About Home Loans

A word about home loans

It is best to build equity in your home over a number of years. Your goal should be to pay your home off in 15 or 30 years or earlier, if possible. Then sell it, and live off the proceeds as part of your retirement, or leave money to your heirs to purchase their own home.

Should you decide to acquire a new home loan your income should easily support the new payment. If you do not have an income or your income is limited, you should not acquire a new loan. A loan has to easily supported by your income NOT your equity. The income you have is what you will use to pay your monthly mortgage with

Take the home buying course to get the best possible home

If you do acquire a new home loan you should:

  1. Have income to easily support your home loan.
    This sounds like a simple concept. But, for many who want a home they think, “buy the home first, then figure out how to pay for it”. Please don’t put the “cart before the horse”, so to speak. You make yourself susceptible to bad loans and bad lenders when you buy a home before you have done your research and determined that you can afford a quality loan. The keyword being quality. The high quality loan, the more qualified you are the more likely you are to stay in your home long term, build equity, and retire without a payment, because it will be paid off by you.
  1. Have researched an affordable, high-quality loan yourself or have a relative research one for you. Compare several home loans, read the fine print, ask plenty of questions, understand all of the terms of the loans. See home buying at Msfinancialsavvy’s home buying course where you will learn over 100 ways to successfully buy a home. It is targeted to women, buy of course men will benefit too. Home buying is tricky, so I recommend you take this very inexpensive home buying course well in advance of buying a home.
  1. Make sure the appraised value of other homes in your neighborhood substantiates the added cost of a new or additional home loan. Understand and verify in writing you have a high-quality loan with no balloon payment attached. Some home buying purchase a home based on emotions and not all of the facts they need to make sure they are not cheated. You can easily overpay for a home when you buy on emotions. This can happen if the sellers lie about amenities or if the neighborhood is going down in value, so for instance you check the last four home sales in the area, but home values are trending down, so you get a home that you could have negotiated way down if you had this information.
  1. Understand in writing, the actual interest rate of your loan, obtain an interest rate you can afford or do not obtain the loan. Sometimes interest rates change before signing for your new loan.

A word about home loans for successful home buying for women

  1. Understand it does not make good financial sense to replace a loan that is nearly paid off with a long-term loan of 15 or 30 years. Once you have your home paid off you are home free. No more payments, you can call it rent/mortgage free, so DON’T mess it up at this time. Especially if your income is not set after retirement, you don’t want to increase your liabilities with a new loan if you are not increasing your income.
  1. Visit, www.fdic.gov (see “looking for a mortgage”)
    There has been a lot of information in the media lately about predatory lenders, they prey on the poor, under-educated homeowners with lots of equity in their homes. If you know of anyone in this category educate them about the dangers of unsolicited home loans or home loans with potential balloon payments.

Remember; do not forget to read the fine print. Also, if you don’t have a job, don’t get another loan. If you need a business loan, don’t use your house; get a bank business loan or Small Business Administration loan, see www.sba.gov. Another option is to delay starting a business until you can acquire proper funding.

Home buying the right way take skill

5 Things to Consider For First Time Home Buyers

For First Time Home Buyers

5 Things to consider for first time home buyers

There are many things you need to do before you start looking for a home to buy.  Many people fail because they  go to a mortgage broker first, who rushes them into the process, get a home that is difficult to pay for, and fail. You will not be a part of this statistic if you follow a few simple rules. In this article I will tell you where to began with these 5 things to consider for first time home buyers:

1. The Home Buyers Mindset
2. Why Buy a Home
3. How to Keep Your Home Long Term
4. Resources to Help You Buy and Keep your Home
5.  The First Things You Need to do Before Contacting a Home Buyer Agency.

Ladies, it takes skills to purchase a home 5 things to consider for first time home buyers

1. The Home Buyers Mindset

  • Purchasing a home is an investment if the home is carefully chosen, is well-maintained home, and is affordable for your budget.
  • You have a home buyers mindset if you understand the above and you love to fix things and don’t mind home maintenance from detecting problems to getting them fixed in a timely manner.
  • Before you get involved with homebuying research, you should understand what it means to have plumbing, electrical, heating, air conditioning and roofing problems.
  • There is no landlord to call because you are your own landlord and are responsible for your own home.
  • The earlier you detect and fix things the better off you are.

Home ownership the right way-is pure joy

2. Why Buy a Home?

  • Your home is a place for privacy and this is probably the most important part about home ownership.
  • Your payment is frozen in time, this will benefit you financially long term versus having to rent.
  • Your payment will stay frozen in time provided you DO NOT take a loan against it. Home refinance is where many first time homeowners lose their home.
  • Your home is a place for your kids to grow up in and call home.
  • Your home is an investment in your future, f you maintain it, and keep your original loan.

3. How to Keep Your Home Long Term

  • Understand the first bill you pay monthly should be your mortgage. If you are sick, well, hurt or depressed, your mortgage has to be paid.
  • Do your research in quality home loans to avoid predatory loans. And, avoid refinance loans. Do it right the first time. Your home is not an ATM machine, don’t allow anyone to talk you into to treating it as such, by refinancing after you already have a quality loan.
  • Don’t allow anyone to talk you into using your home for car or education loans. Get a car loan at your credit union or bank, save money for your education or get an extra job to pay tuition. There are also education loans.
  • Keep your home maintenance current don’t let a leak turn into a flood. The difference in cost to repair and the amount of damage is huge.

4. Resources to help you buy and keep your home

  • There are local, state, and federal resources to help you with home buying.
  • You are required to take classes and should take classes in most first time home buyer programs.
  • Check www.hud.gov for federal resources to help you with home buying. Go to your state’s website and search home buying help for state resources.

5. The first things you need to do before contacting a home buyer agency and prepare for a quality low-interest loan;

A) Stop buying stuff

B) Start selling stuff you don’t need, don’t use, and don’t like – get rid of a large car loan payment if you can sell the car and get a cheaper one.

C) Pay off small bills first, that are the easiest to pay off.

D) Stop using credit cards, if you do, pay off your balances monthly.

All of these things will help to increase your credit score. The higher your credit score the better interest rate and quality loan you can get. First time home buyers need to be aware that getting a low-cost quality loan is at the top of their home buying agenda.

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Home ownership dream for women