Tips on doing a “Refi”
In recent years, millions of homeowners have taken advantage of low rates and refinanced their mortgages. This article describes the advantages and possible pitfalls associated with a “refi.”
Before You Start:
•Remember that refinancing to reduce debt can be a smart move, but refinancing in order to borrow more for consumer purchases (car, vacation, etc.) could set you back significantly.
•Read the fine print on your current mortgage to learn whether you’ll be assessed penalties or fees for “getting out” of that loan early.
•Make sure you know whether you have a fixed or variable interest rate and what the terms are.
Home Refinancing Basics
In recent years, Americans seeking to take advantage of low interest rates have lined up to refinance their mortgages. In fact, refinancing hit an all-time high in 2003, and remained high in both 2004 and 2005, according to the Mortgage Bankers Association of America.
But while it’s true that refinancing has the potential to help you reduce the costs associated with borrowing money to own a home, it is not necessarily a strategy that makes sense for every individual in every situation. So before you make a commitment to refinance your mortgage, it’s important to do your homework and determine whether such a move is the right one for you.
To Refinance or Not
The old and arbitrary rule of thumb said that a refi only makes sense if you can lower your interest rate by at least two percentage points for example, from 9 percent to 7 percent. But what really matters is how long it will take you to break even and whether you plan to stay in your home that long. In other words, make sure you understand – and are comfortable with – the amount of time it will take for your overall savings to compensate for the cost of the refinancing.
Consider this: If you had a $200,000 30-year mortgage with an 8 percent interest rate, your monthly payment would be $1,468. If you refinanced at 6 percent, your new monthly payment would be $1,199, a savings of $269 per month. Assuming that your new closing costs amounted to $2,000, it would take eight months to break even. ($269 x 8 = $2,152). If you planned to stay in your home for at least eight more months, then a refi would be appropriate under these conditions. If you planned to sell the house before then, you might not want to bother refinancing. (See below for additional examples.)
Remember: All Mortgages Are Not Created Equal
Don’t make the mistake of choosing a mortgage based only on its stated annual percentage rate (APR), because there are a variety of other important variables to consider, such as:
The term of the mortgage – This describes the amount of time it will take you to pay off the loan’s principal and interest. Although short-term mortgages typically offer lower interest rates than long-term mortgages, they usually involve higher monthly payments. On the other hand, they can result in significantly reduced interest costs over time.
The variability of the interest rate – There are two basic types of mortgages: those with “fixed” (i.e., unchanging) interest rates and those with variable rates, which can change after a predetermined amount of time has passed, such as one year or five years. While an adjustable-rate mortgage (ARM) usually offers a lower introductory rate than a fixed-rate mortgage with a comparable term, the ARM’s rate could jump in the future if interest rates rise. If you plan to stay in your home for a long time, it may make sense to opt for the predictability and security of a fixed rate, whereas an ARM might make sense if you plan to sell before its rate is allowed to go up. Also keep in mind that interest rates hovered near historical lows in recent years and are more likely to increase than decrease over time.
Points – Points (also known as “origination fees” or “discount fees”) are fees that you pay to a lender or broker when you close the deal. While a “no-cost” or “zero points” mortgage does not carry this up-front cost, it could prove to be more expensive if the lender charges a higher interest rate instead. So you’ll need to determine whether the savings from a lower rate justify the added costs of paying points. (One point is equal to one percent of the loan’s value.)
How Much Would You Save?
A homeowner with a 30-year, $200,000 mortgage charging 8% interest would pay $1,468 each month. The table below illustrates the potential monthly savings and the various break-even periods that would result from refinancing at different rates.
Rate After
Refinancing New Monthly
Payment Monthly
Savings Months to
Break Even*
7.5% $1,398 $70 29
7.0% $1,331 $137 15
6.5% $1,264 $204 10
6.0% $1,199 $269 8
5.5% $1,136 $332 7
5.0% $1,074 $394 6
*Assumes $2,000 closing costs. Rounded up to the next highest month.
A Closer Look at Mortgage Fees
Using data collected during 2003, researchers at Bankrate.com determined the average fees charged to consumers who borrow money to buy a home. Based on a loan of $180,000, the fees broke down as follows:
Average Lender/Broker Fees
Administration fee: $336
Application fee: $205
Commitment fee: $498
Document preparation: $194
Funding fee: $228
Mortgage broker fee: $839
Processing: $320
Tax service: $73
Underwriting: $269
Wire transfer: $31
Third-Party Fees
Appraisal: $327
Attorney or settlement fees: $445
Credit report: $29
Flood certification: $17
Pest & other inspection: $68
Postage/courier: $45
Survey: $174
Title insurance: $605
Title work: $200
Government Fees
Recording fee: $76
Various taxes: $1,339
Stick With What You Know?
Finally, keep in mind that your current lender may make it easier and cheaper to refinance than another lender would. That’s because your current lender is likely to have all of your important financial information on hand already, which reduces the time and resources necessary to process your application. But don’t let that be your only consideration. To make a well-informed, confident decision you’ll need to shop around, crunch the numbers, and ask plenty of questions.
Summary:
•The decision to refinance should only be made if the long-term savings outweigh the initial expenses. To calculate your break-even point, divide the cost of the refi by your monthly savings. The resulting figure represents the number of months you will need to stay in the home to make the strategy work.
•Don’t select a new mortgage based only on its annual percentage rate.
•Also evaluate the term of the loan, whether the interest rate is fixed or variable, and the relative merits of paying up-front fees in exchange for a lower rate.
•Your current lender already knows you and has your financial information on file, so you may be able to get a better deal that way, instead of going to a new lender.
•To get the best possible refinancing deal, you’ll need to shop around, crunch some numbers, and ask a lot of questions.
Checklist:
•Shop around and conduct a detailed cost assessment (with a financial professional, if necessary) to identify which mortgage offers the greatest financial benefits.
•Read the entire contract before signing. Don’t let anyone pressure you or rush you to make a hasty decision.
•If refinancing results in lower monthly payments, use those savings to pursue other important goals, such as preparing for retirement and college costs.
Excerpted from Yahoo Real Estate
Solar roofing with composition shingle product
From the Santa Cruz Sentinel Oct 23, 2010
It’s not your typical roofing job.
First, it requires an electrician, and second, it could offset your entire annual electricity bill.
Jon and Jill Winston’s 4,000-square-foot Westside home will soon feature a unique 12-kilowatt system of roof-integrated solar shingles produced by LUMA Resources of Michigan. Each module produces 60 watts from 16 solar cells.
Installation involves removing the existing roof down to the plywood, then installing a plastic membrane upon which the shingles are placed, according to Kevin Joyce, a partner with Golden State Solar Electric, who is working with the building electrical contractor, Marc Suacci of Suacci Solar, on the Meder Street project. This produces a lower profile than typical rail-and-frame solar installations, which are bolted over the shingles, according to Joyce.
“It actually replaces the roof,” said Robert Allen, the product’s inventor, who is overseeing this first California installation. He is old friends with the Winstons.
LUMA resources launched in 2008 with a grant from the American Recovery and Reinvestment Act as a spinoff from Allen’s family roofing business.
Allen said the product received Underwriter’s Laboratory certification as a roofing product first, before the solar-electric functions were certified. The shingles can be integrated with any roofing system including tar shingles, Spanish clay tiles, or even slate or concrete, Allen said.
Mortgages are about to get more expensive
Posted by Michael Lavigne Real Estate Services Excerpted from SmartMoney.com
Mortgages insured by the Federal Housing Authority have been among the easiest to qualify for. But starting Monday, they’ll be harder to get – and cost more.
In recent years, FHA mortgages have become incredibly popular, as banks, scared by the mortgage meltdown, looked for guarantees to protect loans to even well-qualified borrowers. Today, these government-backed home loans make up more than 30% of the mortgage market, up from 3% in 2006. And for borrowers, the FHA-backed loans require lower down payments and credit scores than most other mortgages.
Now, the federally guaranteed loans are getting less attractive to borrowers. In an effort to recoup losses sustained over the last few years of mortgage mayhem, the Department of Housing and Urban Development, which oversees the FHA loan program, is raising the cost to borrowers and raising the required credit scores. But in order to earn more money on fewer loans to less risky borrowers, the agency is increasing the mortgage insurance fee tacked on to FHA loans to up to 0.95% (it had been 0.50%). Over the life of a 30-year $300,000, that’s at least an additional $24,000 in payments. And because higher annual premiums result in larger monthly payments, some buyers likely won’t be able to borrow as much.
More FHA lending adjustments and price hikes may be on the way. “We will make additional changes as needed,” says a HUD spokesman, citing the need to protect the FHA’s reserve funds. From September 2008 to June 2010, the fund fell from $19.3 billion to $3.5 billion as it helped cover borrowers’ defaults and foreclosures.
All this spells bad news for homebuyers – and at a time when houses are significantly cheaper. With banks reluctant to lend without a guarantee, and private institutions mostly refusing to provide one, the federal government has been the guarantor of last resort for would-be home-owners. And now they’re taking a step back. “The signal is that FHA is expecting a somewhat better borrower,” says Keith Gumbinger, vice president of mortgage-data tracking firm HSH Associates. As of Monday, borrowers with credit scores below 500 will no longer qualify for an FHA-backed loan, and those with scores under 580 must put at least 10% down — up from the 3.5% down payment required previously. For the more 15 million consumers with scores in that 80-point range, the message is clear: If you want to buy a home, get your credit score up first.
Read more: Mortgages Are About to Get More Expensive – Personal Finance – Real Estate – SmartMoney.com http://www.smartmoney.com/personal-finance/real-estate/mortgages-are-about-to-get-more-expensive/#ixzz11uZgrI9i
Home prices in Aptos, CA
Why Overpricing Your Home Is a Huge Mistake
Excerpted from an article by Betsy Schiffman, Forbes Magazine
Home is where the heart is, and it’s also where the debts, headaches and wealth can be. Small wonder, then, that selling a home is a loaded and emotional experience.
All too frequently, homesellers’ opinions of their properties are clouded by sentimentality. Every parent thinks his or her children are extraordinarily gifted beings, and in a similar way, most families believe their homes are worth a great deal more than the average. It’s only natural–couples remember the particular spot in the living room where their first-born took his first step, or the outrageous the bill they received after having the plumbing overhauled, and they assume it all should show up in the sales price. Regretfully, it doesn’t work that way.
In a booming real estate market, in which fixer-uppers in up-and-coming neighborhoods receive multiple bids above the asking price, an overpriced home isn’t a deterrent to buyers–it simply insures the seller will make a nice profit. When the market declines, however, an irrationally priced property is a guarantee that the home will languish on the market longer than comparable properties.
In a down market, the risk of an overpriced home isn’t simply that you won’t get the asking price–there is also a risk of turning off potential buyers and brokers, since an unreasonable price could stigmatize the property. The first flurry of activity occurs in the first month a property hits the market. After a home sits on the market for six months or so, it could become a stale listing that gets filed in the junk drawer of forgotten and overlooked properties.
Now that real estate markets around the country have sputtered, it becomes even more important that a home is priced appropriately. In markets where inventory is rising, even if prices aren’t falling, simply getting the home shown could be difficult if the price is too high. George Ballantyne, a realtor with Sotheby’s International Realty, says that many of his clients have revised the prices on their homes in recent months.
“I have been encouraging many of my clients to put the most competitive price forward to ensure the property will at least be looked at,” Ballantyne says. “Buyers have lots of choices, and they don’t have time to see everything. One important criteria for looking at a home is its price.”
It isn’t hard to imagine, however, how a rational person can turn into a starry-eyed pipe dreamer when it comes to selling a home. After spending years in a home, and investing heavily in it, it doesn’t seem unreasonable to assume that all the care that has gone into a home will increase its value. But veteran brokers say the biggest mistake home sellers make is confusing the price or costs with property value.
“Just because I have a thing for platinum faucets and I spend several thousand dollars on them, doesn’t mean anyone else cares about platinum faucets at all, nor does it mean that the house will sell for $100,000 more than the house next door,” says Jack Cotton, president of Cotton Real Estate in Osterville, Mass., on Cape Cod. “Market value is determined by how the home is valued by the market, not by one individual. It has nothing to do with how much a seller paid for the house; or how much he is hoping to profit from the house.”
The proverbial bottom line: Overpricing your home is a huge mistake in a soft market!
Ocean View listing on Seacliff Dr, Aptos,CA!
Visit www.190seacliff.com to view this luxury ocean view home in detail plus a virtual tour!
Santa Cruz County Market Trends heading into 2010
Michael Lavigne Real Estate Services
(831) 227-3039 Cell
(831) 603-5620 Fax
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via Median Market Action Index for Single Family Properties in APTOS, CA.
via Median Price for Single Family Properties in APTOS, CA.
via Inventory for Single Family Properties in APTOS, CA.
via Median Price Per Sqft for Single Family Properties in APTOS, CA.
via Average Days on Market for Single Family Properties in APTOS, CA.
- Michael Lavigne
