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Archive for the ‘California Mortgage Refinance’ Category

Refinancing for Self Employed

Wednesday, May 17th, 2017

Self-employed people and refinancing

While in all other ways, America encourages entrepreneurs, borrowing is one area that most self-employed people face difficulties. Be it a conventional loan or a mortgage on the home, bankers have a problem offering money to the self-employed. This is because the self-employed often show less income than their counterparts in corporate jobs and also have more complicated tax forms that prevent them from qualifying for these loans. However, even the most difficult lenders would have to agree that there are some compelling reasons why the self-employed should tap into their home equity. If you are self-employed, keep the following issues in mind while refinancing.

The sea of documentation

A non-salaried worker is at a disadvantage qualifying for a mortgage loan because of the complicated tax returns that need to be filed and also the other documentation required. We have moved from times of “no-doc” or “lo-doc” options for the self-employed to the stricter IRS guidelines that operate today. The self-employed have a much harder time getting a mortgage or any other type of loan these days because of the stricter documentation requirements.

Before applying for a home loan, get a clearer picture from your lender about the documents required. These may include your current profit and loss statement, bank statements, and commonly two years of tax returns. For refinancing, you may also require to provide details about your current lender and the pay-off balance.

Choosing shorter terms and a Fixed-rate mortgage

It is advisable for the self-employed to choose a fixed-rate loan that allows for easier planning. On the other hand, especially in the scenario where interest rates are increasing, an adjustable-rate mortgage can have you scrambling if your mortgage rate adjusts higher. You can also benefit if you pay off the mortgage earlier by choosing a shorter term for your mortgage. This will allow you to invest your spare cash back into your business sooner.

Tax deductions on mortgages

Mortgages offer valuable tax deductions that can be especially beneficial to the self-employed. As compared to company employees, non-salaried workers often have to pay almost double the Medicare and Social Security taxes. Mortgages offer two very important write-offs: property taxes and the mortgage interest. These tax-deductible components can surely help the tax burdened self-employed person.

Mortgage refinancing is not easy, especially so for the self-employed. But if you are an ambitious entrepreneur, you will discover that the hurdles of refinancing are well worth the effort in terms of the financial benefits to you and your business.

Fixed versus Adjustable Mortgage

Thursday, May 4th, 2017

Choosing the Right Mortgage Refinance Option

Mortgage loans offer two options: a FRM (fixed-rate mortgage) or an ARM (adjustable-rate mortgage). Fixed rate mortgages provide security and predictability. On the other hand, adjustable rate mortgages can offer the potential for savings, especially if interest rates go down. How do you decide which of these options is best for you? A coin toss may not be the way to take such an important decision. Read this article to dispel the uncertainty about ARMs and FRMs so you can take an informed decision and streamline your financial outlook.

Fixed rate mortgages vs. Adjustable rate loans

Fixed rate mortgages have the same fixed interest rate for the entire duration of the loan. Whether the interest rates go up or down, you don’t have to worry because your rate will remain the same throughout the tenure of your loan and you can plan your cash flows better.

On the other hand, adjustable rate mortgages are tied to a benchmark index. As the market rates fluctuate, the benchmark changes and if affects the rate you have to pay every month. There are many ways in which ARMs can vary, but the most important variables are:

The tenure of the initial rate

The frequency and range of adjustment of the interest rate

Predictability vs. savings

Adjustable rate mortgages often offer a low opening rate that can remain in place for three to seven years. On the other hand, fixed rates offer you the security of knowing that your monthly outflow will never change, whatever happens to the market interest rates. In order to decide which option works best for you, consider the following factors:

Your risk-taking appetite

Your planned duration for owning your home

Here’s how it works. If you are buying a home for the long haul, fixed rate may be better for you. For someone planning to sell their home in lets day five years, the adjustable rate option can offer a low opening rate and they can sell before the rate is revised. It is possible to calculate what your ARM and FRM refinance rates and payments will be by using an online calculator.

However, the factor that will ultimately outweigh any other considerations if your appetite for risk. Even if you are fairly certain that you intend to sell or refinance in a few years, there is a risk involved in the ARM option. You may prefer to pay a little more in the FRM option for the predictability, security and peace of mind it affords.

Bottom-line, you don’t need to flip a coin to decide which option suits you best! While FRM and ARM offer their own set of advantages, you probably know which is the clear winning option for you!

Fix and Flip Mortgage Deals

Thursday, May 4th, 2017

“Fix and Flip” Deals

Investors in real estate make mega bucks by using the “Fix and flip” routine. Quite simply “fix and flip” refers to a three step procedure in handling real estate deals. Buy—renovate—sell for profit. In the basic “fix and flip” scenario, you buy a house, fix it up, and then sell it immediately for profit. Profit means your selling price must be higher than your buying price and the cost of renovation put together.

So, what happens to the investment if there’s a slump in the market? Some investors can lose out on the “flip” in a slowing market. However, with some smart thinking, there are always ways to make money with “fix and flip” in any kind of real estate market.

Estimate “Fixing” costs accurately

One of the key elements of your “fix and flip” profit will depend on an accurate estimation of what it will cost you to renovate the house. Renovation projects typically run over the schedules and over the budget. So keep a generous margin of safety while budgeting.

Estimate “Flip” time accurately

The other key element to assess is the condition of the real estate market. You can make money by “fix and flip” even in a slowing market as long as you can hold on to the property for a while. Remember not to set yourself very restrictive timelines for selling the house. If you can hold on long enough, you will end up with a profit.

Lease with option to buy

In this case, you’ll amend the typical “fix and flip” so you lease the property with an option to buy. Obviously, it’s important to ensure that your monthly mortgage payment is being covered by the rent accrual. At the time of selling, you don’t have to pay any brokerage fees to a real estate agent since your renter is your automatic buyer also.

Many lenders will be able to help you finance a “fix and flip” property. These offers typically finance both the buying price and the funds required for renovations. But making money on the deal is your baby. If you have accurate cost and time estimates, the returns can be well worth the effort!




Hidden Costs of Mortgage Refinancing

Tuesday, May 2nd, 2017

Hidden Costs of Mortgage Refinancing

There is much more about mortgage refinance than meets the eye. While you rejoice the prospect of saving a lot of money, you should also be prepared for hidden costs that may take you by surprise. It is always better to do your homework before you take the plunge. Make sure you do the math properly taking everything into account to see how much you’d really save.

Comparison is the name of the game. Never settle for the first offer. Always compare rates from at least four lenders for refinance

Generally, the cost of home refinancing will be lower than your original loan, but the fact remains that refinancing a mortgage loan involves closing costs. There are some fees that don’t apply to refinancing; but the closing costs can still be substantial. So, it is prudent to confirm the fees that your lender will charge this time around.

You may want to consider the roll-in financing option that some mortgage lenders offer. This gives you the freedom to roll the refinancing closing costs into the loan itself. Thus, you won’t be required to pay any up-front costs, but, remember, this will result in somewhat higher monthly payments, because your loan balance is higher.

You will obviously want to know how much you can save by lowering the interest rates. After all, that is the primary reason why go in for refinance in the first place. You can use the amortization calculator to see how much you can save through better rates alone. All you have to do is just enter the loan amount, interest rate, and the length of the loan to see how much interest and principal you’ll be paying each month.

You must know that even a couple of percentage points can make a big difference and swing the percentage any which way. For example, you can save $300 a month by switching your $180,000, 30-year loan from a rate of 9 percent to 7 percent. That’s quite a lot, isn’t it?

On the other hand, if you take a home loan mortgage refinancing for a lower rate, it will cut down tax deduction, which means you will have to pay higher income taxes. Now, this is something you were totally unaware of. But, it is a big factor in considering the cost of refinancing. You know your tax bracket. So, you can figure out the impact it will have on your tax return. For instance, if you’re in the 25 percent tax bracket, and a mortgage refinance will lower your monthly interest payment by $200, taxes will claim $50 of that savings. As a result, your true savings will be $150 a month.

If the value of your home increases over time, then you will regret your decision of refinancing, because you will lose those pesky PMI payments. However, you have the freedom to end your PMI payments as long as the new loan amount is lower than 80 percent of the property value. In order to find out how much PMI is costing you, you need to check your current mortgage statement.

In the ultimate analysis, refinancing is a welcome option when you’re stuck in a high-interest loan. It can considerably lower your rate even if it is less by just a couple of percentage points. You can recoup the closing costs in a matter of months. However, you must look at the numbers before you leap. That will help you save a lot and you need not worry about unanticipated surprises.