When to refi

Typically homeowners will refinance their current mortgage for one of two reasons: to get a lower rate and payment or to cash out on some equity. Since rates are so low now I'll only discuss the first. The first step when thinking about a refi is to see what your loan characteristics are currently. This is the rate, the term length, whether there is mortgage insurance, loan amount, any seceondary financing and whether there are escrow accounts or not. Now that you have this info it's time to contact a lender and get a loan quote.

The lender will need the above info as well as your plans for staying in the house. Do you plan on being there 5 years, 10 years, forever? Or maybe you plan to move in 3 years but will rent it out at that point. This gives a time frame for comparing refinancing vs not refinancing.

The lender can then give an estimate of where the rates and terms are for available financing given your scenario. There are closing costs involved in refinancing so it's good to find the 'break even point'. This is when the interest you save each month is cumulatively enough to reach the amount of closing costs you pay.

For example: Let's say closing costs are $5,000 and the interest savings per month is $200. You'd need to keep the loan for $5,000/$200 = 25 months for the refinance to be worth it.

As you'll be estimating how long you'll be in the house and can't name a specific month, I like to give a cushion of 6 months to a year when deciding whether it's worth it. In the above example, if you said you'd be in the house 2 1/2 years, I'd advise that it's probably not worth it as you may very well move before the break even point. Alternatively if you planned on staying 3 years, I'd say it'd be worth refinancing then.

There are a few more steps and info needed to get a proper rate quote from the lender, but once that's accomplished we'd go through the above process. If you think your rate may be a little high, give me a call. I'd be happy to discuss.
-Bill 512-844-1910
billconover@america-lending.com

$8000 homebuyer credit

Legislation was pass as part of the stimulus package for a new tax credit for homebuyers. The new credit is $8,000 and is a true credit that does not need to be repaid. This is much different than the previous $7,500 credit, which had to be paid back to the IRS.

As it stands now, it’s free money. This will be a great deal to take advantage of. If you’re thinking about buying, give me a call and we can discuss options.

There are a few stipulations to the credit and I’ve outlined the main ones below:

• Buyer must be a first time homebuyer
  
• Credit is the lesser of $8,000 or 10% of sales price
  
• If buyer keeps house 3 years, credit does not need to be repaid. If owner sells before 3 years is up, the full amount needs to be repaid
  
• Must purchase before December, 1 2009
  
• Income must be lower than $75,000 for filing single and $150,000 for filing jointly
  
• Credit is taken when you file your tax return