Posts Tagged ‘ mortgage ’

Refinancing With Declining Home Values

Guest Post

The criteria for refinancing a mortgage through a traditional lender typically require some degree of equity in the property. At the very least, homeowners should not owe more than the home’s value in order to qualify for the best refinance rates.

After the housing market crashed in 2008-09, many homeowners found themselves struggling to refinance their mortgages in light of sinking home values and disappearing equity. However, there is hope for refinancing even for borrowers underwater with their current mortgage.

Home Affordable Refinance Program

5 Reasons to Buy LESS House Than You Can Afford

By Kevin M

For generations the conventional wisdom on housing was always to buy the most (or more) house that you can afford. The rationale—which worked for decades—was that a house was the closest thing to a guaranteed investment, and by buying the most expensive property you could afford you were insuring the greatest possible payoff over the long run.

That thinking caused many households to go deep into debt in order to make it happen, which created a vicious circle of greater debt feeding higher property prices.

What a difference a few years can make?

The entire conundrum went full circle, with property prices rising consistent with higher mortgage levels, until the borrowing party stopped. Suddenly John and Jane Q. Homeowner could afford to borrow no more, and the whole property construct has gone into the ditch.

Will we get out of that ditch anytime soon? Maybe…but maybe not, at least not for a long time.

Rather than speculating as to when the long awaited turnaround will occur, it might be better to plant our feet firmly in the ground that is now, accept our new reality and make adjustments in our housing expectations that are consistent with that reality.

Now is the time to reverse the psychology that drove both property prices and debt to dizzying levels and adopt a new strategy: buy LESS house than you can afford! Why?
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Is Now a Good Time to Refinance?

By Kevin M

Rates for fixed rate mortgages are below 5% for a 30 year loan, and down close to 4% for 15 year loans. So is now a good time to refinance? Maybe. And only maybe.

If you have an adjustable rate mortgage (ARM), a funky ALT-A, a variable home equity line of credit that can be consolidated, or most definitely a sub-prime deal, refinancing is a no-brainer. You’ll probably get better terms and a much better rate, so do it and don’t delay. No one ever needed a six month, interest-only ARM with negative amortization in the first place!

It’s not all about rate!

Tax Benefits of Homeownership – Three Reasons Its Over-rated

By Kevin M

One of the most compelling reasons for owning a home is the heavily touted tax benefit owing to deductions for mortgage interest and property taxes. Real estate agents will play this benefit for all it’s worth in extolling the idea of homeownership for all.

However for three reasons, this benefit is not what it used to be: a generous standard deduction, low mortgage rates and low marginal tax rates.

The tax benefit of homeownership became an entrenched concept back in the 1970s and early 1980s and at that time it had overwhelming merit. Mortgage rates were in double digits most of the time, marginal tax rates ran as high as 70% and standard deductions were down in the low thousands. Owning a home made major sense even for moderate income earners and was an article of faith in the higher income brackets.

None of that is true today, yet the tax savings pitch remains. Standard deductions can exceed $11,000, interest rates are down around 5% and marginal tax rates cap out at 38% (but are substantially lower for the vast majority of households). Yet the notion of major tax savings remains almost unchallenged.

Buying vs Renting a Home – Its Not All About Money

And other questions you should ask before buying a home!

By Kevin M

Many articles have been written on the buy-verses-rent question, but most of the analysis tends to center on the dollars and cents side of the question. We read about tax advantages, investment potential, home buyer tax credits, income ratios—all important considerations, but all essentially monetary in nature.

Rather than crunching numbers, I’d like to consider the question from a mostly non-monetary angle, and discuss factors which are of at least equal importance in making the decision to buy or rent a home. Most have to do with lifestyles, attitudes and future prospects.

Envision a Future Without Debt

STRATEGY #9 TO SURVIVE A DOWN ECONOMY

By Kevin M

In the best of times, borrowing seems to be a sensible way to get the things we want but can’t afford to purchase in full right now, but we’re sure we can tackle later with a predictably increasing income stream.

But when economic fortunes shift into low gear—as they are now—the same debt accumulated during better times can become a heavier burden, even one which is impossible to bear. Other than paying debt down and eventually off completely, there isn’t much we can do about the debt already accumulated. But the Great Recession should be a wake up call to all who might have come to view debt as a traveling companion in life.

In 10 Ways To Survive a Down Economy (published on Christianpf.com June 1) we listed ten strategies to help you deal with the bad economy. Our topic for today, Strategy #9:

”Envision a future without debt, and then pursue it.” Gradually pay down—then pay off—your debt. This includes your mortgage. It should go without saying that lowering your cost of living will be a crucial element in this effort as well. (Are you noticing a pattern?)”

Is that even possible any more?

The “Boring” Benefits of Staying in Your House and Paying Off the Mortgage—PART TWO

PART TWO—REFINANCING YOUR CURRENT MORTGAGE AND CONCLUDING THOUGHTS

By Kevin M

Yesterday, in Part One of this series, we took a look at the largely hidden costs of purchasing a new home. Today we’ll take a similar look at the hidden costs of refinancing your current home to determine if doing so is truly in your best long term financial interest.

Refinancing is far less expensive than buying a new home, of course, but the decision to refinance your mortgage to a lower rate isn’t always as clear cut as it seems.

With refinances, people tend to be obsessed with rate. But let me offer that rate alone can be a deceptive metric.
Read more »

The “Boring” Benefits of Staying in Your House and Paying Off the Mortgage—PART ONE

PART ONE—BUYING A NEW HOME

By Kevin M

In response to the mortgage meltdown/real estate slump of the past two to three years, the U.S. government has intervened with the take over of FNMA and FHLMC to insure the free flow of mortgage money, interest rates are being held down to the 5% level and an $8000 home buyer credit has been put in place to stimulate activity.

But should you as a homeowner take the bait and either trade up to a new and more expensive home, or perhaps refinance into a lower interest rate loan?

I’m going to take the contrarian’s view and argue against either course.

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Posts Tagged ‘ mortgage ’

Refinancing With Declining Home Values

Home Affordable Refinance Program

5 Reasons to Buy LESS House Than You Can Afford

Is Now a Good Time to Refinance?

Tax Benefits of Homeownership – Three Reasons Its Over-rated

Buying vs Renting a Home – Its Not All About Money

Envision a Future Without Debt

The “Boring” Benefits of Staying in Your House and Paying Off the Mortgage—PART TWO

The “Boring” Benefits of Staying in Your House and Paying Off the Mortgage—PART ONE

Financial Management