Pick up the phone | You Should Call Your Mortgage Lender in 2017

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We all fall into the same bad habit: Once we take out our mortgage loan, we tend to forget about it – at least until it’s time to send in our payment each month.

U.s Dollar Bills Pin Down on the GroundBut vow to take a different approach in 2017. Instead of mostly ignoring your mortgage this year, take an active role in managing it.

To do this, give your mortgage lender a call. You might be able to tweak your home loan so that you can save some serious dollars this year. Here are three big reasons to call your lender, and take control of your mortgage loan, this year:

It might be time to refinance: Mortgage interest rates have been low for a long time. And they continued to drop throughout the end of 2016. So maybe it’s time to talk with your mortgage lender about the possibility of refinancing your home loan.

Sure, a refinance isn’t free. But if you can drop your interest rate by a point or more, you’ll generally pay back your upfront investment quickly. If you plan on staying in your home for more than five years, the odds are good that refinancing your loan to one with a lower interest rate might make financial sense.

You’ll never know, though, unless you give your lender a call. Your lender will be able to run the numbers to determine if a refinance is the right move.

You might be able to eliminate a ton of interest by shortening your loan’s term: Maybe your interest rate is already low. You can still save money by refinancing your mortgage loan to one with a shorter term. Say you are paying off a 30-year fixed-rate mortgage today. By refinancing to a 15-year version of this loan, you can reduce the amount of interest you’ll pay over the life of your loan by tens of thousands of dollars.

Again, though, you should talk to your mortgage lender to determine whether the interest savings make the cost of refinancing worthwhile. A lot of this depends upon how long you plan to live in your home.

You might be able to pay off your mortgage early—but doing so might not make sense: Maybe you’re coming to the end of your mortgage loan’s lifespan. That’s good news. You might even be tempted to pay off your loan early just to get rid of the monthly payment.

But often, paying off a mortgage loan early isn’t the wisest of moves. Again, checking in with your mortgage lender might be in order.

Mortgage debt generally comes with lower interest rates than do other forms of debt, especially credit-card debt. If, then, you are paying off this kind of debt, it makes more sense to concentrate your money on reducing it than it does to pay off your mortgage loan early.  kaybakerassociates@ec.rr.com

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Categories: mortage planning, Mortgage choice, Mortgage Fine Print, Mortgage ideas

Want To Save Big Dollars? Pay Your Mortgage Bi-Weekly

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river2We get it. No one really enjoys making a mortgage payment each month. But here’s a secret: You can shorten the length of your mortgage loan without refinancing your loan to a shorter term.

You simply have to make bi-weekly payments.

Here’s how this works: Normally, you’ll make 12 mortgage payments a year, one each month. If you owe $1,000 on your mortgage each month, you’ll make 12 mortgage payments for a total of $12,000 a year. But if you split your payment into bi-weekly payments, you’ll pay $500 every two weeks.

This pays off in a big way: Because there are 52 weeks in a year, you’ll make 26 bi-weekly payments. That is equal to making 13 monthly payments in a year. That’s right, with the bi-weekly mortgage payment, you’d make one extra mortgage payment each year than you would when paying 12 standard monthly payments.

Bi-weekly payments reduce the payoff time of your mortgage loan. The number of months you chop off your mortgage varies depending on the size, interest rate and length of your loan. If you are paying off a 30-year, fixed-rate mortgage loan of $180,000 with an interest rate of 4%, you’ll pay off your loan in 25 years and 11 months, eliminating four years and one month of payments. That means you’ll also save more than $20,000 in interest during the life of your loan.

Those are some compelling reasons to consider a bi-weekly payment plan. Call us today if you are interested. We’ll walk you through the process and help you make the right decision for your financial situation.

Categories: Mortgage, Mortgage 101, Mortgage choice, Mortgage ideas, Mortgage options, Mortgage points, mortgage rates, Mortgages, MPP mortgage, Uncategorized, Wilmington NC Neighborhoods

HEAVENLY Why You Don’t Need An Angelic Credit Score To Get A Loan Today

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You can get a Wilmington NC mortgage loan today even if your past financial habits have been more devilish than angelic.Here’s a look at the steps you can take this year to boost your odds to qualify for a home loan, even if your three-digit credit score isn’t as sky-high as you’d like.

Boost your income, cut your debts: The most important guideline associated with the new Qualified Mortgage (QM) rule might be the one relating to your monthly income and debts. According to the QM rules, a mortgage can only be considered a qualified one if borrowers’ total monthly debts—including their estimated new mortgage payment—equal no more than 43% of their gross monthly income.

So if you want to convince lenders that you’re a good risk, work to improve your debt-to-income ratio. You can do this by either boosting your monthly income or eliminating some of your monthly debts. The lower this ratio is, the more attractive you’ll look to mortgage lenders, even if your credit score isn’t perfect.

Consider An FHA Loan: A mortgage loan insured by the Federal Housing Administration (FHA) does come with some extra costs. But it also comes with some big benefits for credit-challenged consumers. You can qualify for an FHA loan even if your FICO credit score is as low as 500. Of course, a higher score is better. If your score is at least 580, you can take out an FHA loan with a required down payment of just 3.5% of your home’s final purchase price. If your credit score is under 580 but at least 500, you can still qualify for an FHA loan, but you’ll need a down payment of at least 10% of your home’s purchase price.

Your credit score makes a big difference in how much down payment is required. Consider a home that costs $150,000. A down payment of 10% will cost you $15,000. One of just 3.5%, though, will cost you a much more affordable $5,250.

Be Willing To Pay More In Interest: Mortgage lenders generally reserve their lowest interest rates for those borrowers whose FICO credit scores are 740 or higher. If your score is lower, though, this doesn’t mean you won’t qualify for a mortgage loan, but you will have to pay a higher interest rate. If your score is 740, for example, you might qualify for an interest rate of 4.25% on a 30-year fixed-rate mortgage loan of $200,000. But if your FICO score is just 640, you might have to take an interest rate of 5.5%—or higher—on the same loan. A higher interest rate will mean a higher monthly mortgage payment.

If your interest rate on that 30-year fixed-rate loan of $200,000 is 4.25%, you’ll pay about $983 each month in interest and principal. (This doesn’t include any money you’ll pay each month for property taxes and homeowners insurance.) If your interest rate on the same loan stood at 5.5%, your monthly payment—minus insurance and taxes—would be about $1,135.

Boost That Score: If your score is too low, of course, you will struggle to qualify for a home loan. But you can take steps to boost that score. Pay all your bills on time. Reduce your credit-card debt. If you gradually build a solid credit history, your score will rise. Just be patient. Boosting a credit score isn’t complicated, but it does take time. Expect to spend at least nine months to move your weak credit score high enough so that you’ll look like an angel to mortgage lenders.

Categories: Mortage options, Mortgage, Mortgage 101, Mortgage ideas, Mortgage options, Mortgage points, Mortgages, Uncategorized, wilmington nc real estate, Wilmington NC real estate stats 2014

MONEY DIET :: 7 Easy Ways To Reduce Your Loan Payment And Increase Your Savings

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There are many ways to reduce the amount of money you send each month to your mortgage company. You just have to know where to cut the fat. Check out these seven money-diet tips to discover how you can slim down your monthly mortgage payment.

1. Refinance to a lower interest rate. Even a half-percent drop in your interest rate could save you hundreds of dollars a year. Drop a whole percentage point, say from 6% to 5% on a $150,000 mortgage for 30 years, and you’ll save more than $1,100 annually. Get a lower rate and save even more! Remember, though, you may have to pay closing costs to refinance. Make sure you’ll live in your home long enough to recoup those costs.

2. Refinance to two loans. If you took out a jumbo loan (one that is larger than local conventional loan limits in your area) when you purchased your home, you probably paid a higher rate than what was then available for conforming loans. Currently, a non-conforming jumbo loan is anything higher than $417,000 in most parts of the country. If you want to refinance above that amount, you can get around the higher jumbo rate by taking out two mortgage loans instead.

For example, say you want to refinance $500,000. You could take out a first mortgage for $400,000 at the lower conforming-loan rate. Then, you would take out a second mortgage or home equity loan for $100,000. Although the rate on the second may be higher than rates available for a jumbo, you’ll be paying that rate on a comparatively small amount of money. Overall, your rate for the entire $500,000 in loans will be lower than for a jumbo. That will mean a lower total monthly payment.

3. Double up on a small down payment. Refinancing to two loans also makes sense if you put a small down payment on your home. If you paid just 10% down on a $150,000 property, for example, you’re probably paying a private mortgage insurance (PMI) premium with your monthly mortgage payment. Once you have 20% equity in your home, you can drop that payment (as we’ll discuss later). But with less than 20%, it might pay to refinance to a 75/15 mortgage. Under this scenario, you would take out a first trust for 75% of the home’s value and a second trust for 15% of its value. With neither loan showing less than 20% equity in the home, PMI won’t be required.

4. Review your ARM calculations. Industry experts say consumers can lose money to calculation errors lenders sometimes make when re-computing adjustable-rate mortgage payments as they change year to year. Dust off your closing papers and look up the current rate to find out what you’re supposed to be paying according to the adjustments and caps stipulated for your loan. If you find a mistake in your favor, contact your mortgage company to have your payment changed to the lower amount.

5. Drop Private Mortgage Insurance (PMI). If you bought your home with less than a 20% down payment, you probably have private mortgage insurance. PMI can cost hundreds of dollars monthly on some loans. The Homeowners Protection Act of 1998 says your lender must automatically cancel PMI when your equity reaches 22% on the loan pay-down schedule. But you can also drop your PMI once your equity reaches 20% through market appreciation and payments. If your home has been appreciating, and you think you owe less than 80% of its current value, contact your lender. Chances are you’ll have to pay for an appraisal (about $300 to $400) to prove your home’s current worth. But after that, you’ll see monthly savings in a lower mortgage payment without the PMI premium.

6. Get a longer term. Although this method may not suit everyone, if you need to increase cash flow by reducing your monthly payment, you could extend the term of your current loan. For example, if your balance is down to $100,000 on a $150,000 30-year mortgage that you took out 18 years ago at 7.5% interest, your monthly principal/interest payment would be $1,048.82. If you refinanced the $100,000 12-year balance with a 30-year loan at even the same interest rate, the longer term would lower your principal/interest payment to $699.21. That’s a big drop in payment, but it also means you’ll be paying on your home 12 years longer than before refinancing. And, of course, your total interest expense on the purchase of that home will be much higher.

7. Correct an outdated tax assessment. You’re probably paying a portion of your annual real estate taxes with your monthly payment to your mortgage holder. Have you checked your tax assessment to make sure you’re not paying too much? The taxing authority could be calculating taxes on your house with incorrect information, e.g., counting an extra bedroom, bathroom or finished basement that you don’t actually have. This would increase your tax bill and your monthly payment. Keep track of your tax assessment and challenge it if it doesn’t reflect actual property values in your area.

 

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Kay Baker Associates | 1001 Military Cutoff | Ste 101 Wilmington, NC 28405 | kaybakerassociates@ec.rr.com | 910-202-3607 | Fax 910-338-2428

Copyright © 2017 Wilmington NC Real Estate Guide. All rights reserved. Disclaimer: All content on this blog is my own opinion and should not be treated as fact or relied upon when purchasing or selling real estate.