(MA) 617-297-8641 (RI) 401-641-5774

Contact@MandrellCo.com

All posts tagged Financing

First talk a little bit about what equity is. Equity is the value that you have in your home, the difference between the market value of the property and the debt on the property. If you have $100,000 home, a home that’s worth $100,000, you owe $60,000 on that home, you have $40,000 in equity. Simplest explanation, 100,000 minus $60,000 in debt. If you sold the property today, you’d walk away with $40,000. Million dollar home, you have $300,000 in debt, you have $6, $700,000 in equity. One million, pay off the 300,000. The equity that remains is 700,000, which is yours.

Let’s talk a little bit about how to use home equity loans and home equity lines of credit to tap into the equity in your home and to accelerate your wealth building process. First, let’s talk about home equity loans. A home equity loan you borrow at a fixed amount. The payments are fixed. Your interest rate is fixed. The payments are fixed. You get a lump sum today and you are basically making payments over the 10, the 15, the 20-year term of the home equity loan, so you know what your payments are every month, and it’s predictable. No closing cost is listed on this screen, but please pay attention to that. You’re never going to take out a mortgage and have there be no cost. A lot of times, it’s just rolled into the back end. You take out 100,000, but your mortgage goes up by 103,000 or 104,000. There are always going to be costs there. Just pay attention to what they are and how does it affect your overall loan.

Interest, usually tax deductible. As of right now, the current laws in the United States allow for interest on mortgages to be tax deductible. The word usually is thrown in there because who knows if those laws are going to change in the future, but as of right now, interest on mortgage or your mortgage interest expense is tax deductible.

What is the difference between a home equity loan and a home equity line of credit? A home equity line of credit, you do not receive a lump sum. Basically, what you do is you’re basically taking $100,000 and tying that up. You basically are using the equity almost as a credit card. In that sense, you charge or you write a check for $5,000 and then you pay off that $5,000. Now you have $100,000 in available credit once again. You buy a car with your line of credit, and you spend $25,000 on that car. As you slowly pay off the $25,000 loan, that credit becomes available again. It’s like a credit card. It’s a more revolving line of credit than it is a loan. A loan you get a lump sum, payments are equal over the term of the loan. The line of credit acts more like a credit card, and also your interest rates are variable. They are usually capped or tied to an index.

You’ll have, I would say, if you start off with a 6% interest rate, it may be capped at 9, but over the life of this home equity line, you may not know exactly what your payments are. Your payments are going to be based on how much you spent or how much you borrowed and what the interest rate is at that particular time. Why would you use one versus the other? I’ll give you two examples of how they are used by investors to accelerate wealth building. Let’s say, for instance, I have a neighbor who wants to sell their property to me. They’re in no particular rush. I am very interested in the property. It’s maybe a multifamily and I know it’ll cash flow if I can just get in and rehab the property and put it back on the market with some new tenants. I’m going to tell my neighbor, “I’m going to take some equity out of my home, and I’m going to now use that equity as a down payment for a new mortgage so I can buy your property.”

In that case, I’m going to go after the home equity loan. I have a purpose. I already know what my purpose for taking this equity out of my home is to go purchase a new home. I would rather my payments be fixed so I can calculate them and I know what they are every single month. I”ll have two mortgages to worry about, two additional mortgages to worry about, the home equity loan, plus the new property loan. I’m most likely going to use the home equity loan as a down payment for my new loan to purchase my neighbor’s property. Depending on where you are in the country or how much equity you have in your home, if you have enough, you can borrow the entire purchase price from your home equity loan.

Why would I use the home equity line of credit? I do not have a neighbor who’s looking to sell, but I know I want to buy and investment property in the future. I want to have access to the cash. I know that when I make an offer on a property, a lot of times, I have to move quickly. I want to have access to the cash immediately and be able to write a check with no going to the bank. I already want my funds to be available so I can move quickly, and I do not know my purpose as of yet. I’d probably be in that situation be looking for a home equity line of credit that I can take, borrow against my house, and in anticipation of using that for some future purpose.

To sum it up, I would say home equity loan is I understand my purpose. I’m going. My purpose is there. I have an existing need for this money or an existing want. I’m going to go take out the loan. I’m going to make my payments fixed and predictable. I know that I want to do something in the future, but I’m not quite sure what it is just yet, but I want to have access to quick cash, I’m probably going to use the home equity line of credit to do that in the future.

One other way that you can tap into your home’s equity that’s not exactly listed here is doing a cashout refinance. Let’s say you have a house. It’s worth $500,000, and you owe $200,000 on that piece of property. Instead of having two mortgages, instead of having your first existing mortgage and then a home equity loan on top of that as a second mortgage, you basically do a cashout refinance. You want to pay off the existing 200,000 and then take out an additional 100,000 or 50,000 or whatever it may be into one new mortgage. My new mortgage is going to be 300,000, paying off the old mortgage of 200,000, and putting $100,000 into my pocket. That is called a cashout refinance of your mortgage, and that is another way that you can tap into cash, as well.

Hopefully, this was helpful. If you are looking for mortgage brokers that you would like to speak to about home equity loans or home equity lines of credit, we work with some of the best in the business, especially here in Boston. Please click on the link below in the video description. Fill out the quick form. Tell us what you’re looking for. We would love to connect you with some of the people that we work with on a regular basis. Thanks for watching.

Read more

Learn How To Avoid Buying More House Than You Can Afford

If you’re looking at realtor.com. If you’re looking at Zillow or Trulia and you’re looking through homes and you … Or you’re looking on MLS through your real estate agent’s news feed and you’re wondering exactly how you could calculate the mortgage on this. You really don’t want to keep going back and forth to your mortgage broker. You really want to be able to calculate or get a good idea of what your mortgage payments may be on your own, then you can use this mortgage calculator.

This mortgage calculator can be found at the bottom of our website. This is mandrellco.com. Scroll all the way down to the bottom of the page, and one of the resources is the mortgage calculator. It will bring you to this page right here.

Let’s assume we’re going through a scenario, you are buying a $300,000 home. I’m going to put in $300,000. Again, there are so many different variations of this that you can go through. It’s really going to be something that you’ll have to discuss with your mortgage broker, with your real estate agent. Find out what program is best for you.

Let’s say you’re in a conventional mortgage and you are putting 5% down, 5% of 300,000 is $15,000. That’s the down-payment. In terms of the interest rate, they’re asking you, “What is your mortgage interest rate?” If you’ve spoken to a mortgage broker already, you should have a very good idea of what interest rates are currently and what you could expect.

If you have not and you just really want to play around with it, what you could do, and what I’ve done, is just basically went to Google and just typed in average mortgage rates. This is what’s come up in the search. I’ve scrolled down here and I’ve just basically seen 30-year fixed mortgage rate as of January 2nd, 2017, is approximately 4%, but a little more. You can click on that, it will bring up Zillow. You could see what interest rates are being offered through different banks.

Again, if you have stellar credit, your number, or your rate may go down. If your credit is less than stellar, that number may go up a little bit more. If you’re putting a substantial amount down, that number may go down. If you’re putting the minimum down, say, 3 or 3.5% in an FHA or mass housing loan, then that number may go up just a tad.

Let’s use a number of let’s say four and an eighth today just to see where we are, 4.125. We’re going to stick with a 30-year fixed. PMI is primary mortgage insurance. Again, when you speak to your mortgage broker, if you’re on a Federal Housing Administration loan or an FHA loan, you will have PMI and your mortgage broker would be able to tell you exactly what that is.

If you are purchasing a condo, most likely on your MLS listing or where you’re pulling the information from, you will be able to pull the condo fee. You can plug that number in as well. If it’s a single family home or a multi-family home, it probably will not have a condo fee.

The taxes are usually listed right on your listing sheet as well. For this example, let’s plug in $25,000. Insurance is not typically listed. Rule of thumb. Again, this is not a hard and fast number, but just to give you a general idea. In Massachusetts, I usually use a number of about a half a percent.

In this case, let’s say we’re purchasing a half a percent of the home value. In this case, it’s 300,000, we’re purchasing at 300,000. One percent would be 3,000. I’m going to say a half of that is 1,500 bucks for my home insurance. I’m going to take all these number, $300,000 purchase price minus my 5% down, which means I’m financing 285 over 30 years at four and an eighth. I’m going to pay taxes per year of $25,000, a little over $200 a month. I’m going to pay insurance of $1,500, or a little over a hundred dollars a month.

I calculate my payment. You’re going to have a principal and interest payment of 1381. If you escrow in. What that means, if you pay all your taxes and insurances with your mortgage payment, which is most common, you’re going to have taxes and insurance for a total payment of 1714.59.

If you bought a house for 300,000 and put 5% down over 30 years at this particular interest rate with these taxes and these insurance, this is what your total mortgage payment would be. This is an excellent way for you to play around with it. If you say, “You know what? I can afford up to about $2,000 on my own. I feel comfortable paying of about $200,000 on my own.” You can now adjust this and go 325, would put me up at about 1835. 375 may put you just over $2,000. Maybe 360 is somewhere where you really want to be.

Maybe you’re looking at homes in the 375 range with the idea of possibly negotiating your way down to a 360 mortgage payment hoping to land a total payment of no more than $2,000 a month where you’re comfortable.

Hopefully this was helpful. Again, you could access this calculator one of two ways. You could go to mandrellco.com, scroll all the way down the bottom of the page and capture the mortgage calculator, or click on the mortgage calculator. In the description of this video, there is also a link to this calculator as well. Hopefully this was helpful. Talk to you soon.

Thanks for watching our video. Did you find this information useful? If so, please remember to like the video and also subscribe to our channel for more useful information.

I would also encourage you to share this video with your friends and family. Thanks again and we’ll talk to you soon.

Read more

There are some key differences between a short sale and a foreclosure in today’s real estate market. Although the economy is on the up and up, many people are still faced with this decision and we hope this video clarifies some of the differences to help you make an informed decision.

5 comparison criteria:

  1. Ability to obtain a mortgage in the future
  2. Effect on credit score and credit history
  3. Possible effects on security clearances
  4. Current and future employment
  5. Deficiency judgement

Short Sales impact you less severely than foreclosures!

If You have further questions on the process or would like to schedule a free, no obligation consultation, contact us at Contact@MadrellCo.com.

Read more

8 Simple Ways To Save Up Down Payment Cash

One of the largest obstacles between you and home ownership is coming up with enough money fund the required mortgage down-payment. Let’s assume that we’re looking for the average single family home in Massachusetts which is roughly $350,000. Let’s also assume you are like the majority of home buyers in this state and qualify for an FHA Loan, which is a 3.5% down payment or roughly $12,250. This isn’t amount of money most people have sitting in there bank accounts. So how do you find the cash to fund your dreams of home-ownership? Here are a list of things most buyers do to save up some cash:

Side Job or Temp Work –  Can you pick up a side job or work for a temp agency?  It’s may not be something you  ant to do permanently, but it’s worth it to reach your home-ownership goals.  Let’s assume you can pick up a part time job working 10 hours per week at $15 per hour. If you worked 48 of 52 weeks in the year you’d have an extra $7200 (before taxes) to add to your home savings account.

Cut Cable & Phone Bill – Many of us have Comcast or Verizon packages that consist of every movie channel, sport package and various other upgrades. Are these things we can live without for a little while?  The same goes for many phone bills. Many of us are paying $40 per month or more for data packages while the only thing we do with our phone that require data is posting to Facebook. If you can reduce one of these bills by $50 or two of them by $25 each, you would be saving a total of $600 for the year.

Cut Gift Spending – We all love our family and friends but could you cut back on birthday and holiday gifts for one year? I think your friends and family would stand by you if your gift were less expensive this year because you’re saving to purchase a home. Statistics show cutting this spending out entirely can put another $600 in your pocket for the year.

Work Overtime – Are there overtime hours available at your current job? Maybe it’s time to stay late or come in early. It may be a good idea to approach your manager and see what extra hours he/she can offer you.

Save Your Tax Returns – Getting a nice check back from the government this year? Don’t view this influx of cash as discretionary spending. Many Americans look at this check(s) as chance to buy a bigger TV or various other luxuries. Be smart and save this money for your down payment. The big screen will look better next year in your new home.

Hang At Home – Let’s assume that you’re like most of us and you love to hang out on the weekends. If you’re spending an average of $100 per weekend (drinks, food, movies etc) and your going out every other weekend, you’re spending an average of $2600 per year on entertainment. Can you cut than down this year to just 1 weekend per month? If so you’re saving $1300 per year and you’re that much closer to you saving goals.

Cut Your 401K Contributions – I’m a big believer in saving for your retirement, but I believe even more that every individual should own their own home. It may be a good idea for you to speak with your HR department and cut down (or cut out) your retirement contributions and add those additional funds to your savings.

Ask Your Family For Help – When your family sees all the lifestyle adjustments you’ve made to save for home ownership, they will see how important it is to you and will become important to them as well.  Can they help you with your down payment?

Are you looking for more helpful home ownership tips? Like us on  Boston Investment Specialist

Read more

What Is Your “Commitment Day” When Purchasing A Home?

Many first time homebuyers are unaware of the timelines and deadlines associated with purchasing a home. They understand the list in that there is a close date on their offer but as real estate professionals we must inform our clients that sometimes, these dates are flexible depending on a few different factors. 

If there are delays in the checklist of items lenders, attorneys, inspectors, appraisers, buyer/seller documentation, then there can be a delay of the closing date in which we would request an extension.

On every offer submitted, we have a mortgage commitment date and a closing date. 

The mortgage commitment date is the date by which the bank says YES, you have truly satisfied all requirements and we are granting you permission to purchase this home. In order to issue a commitment letter, banks need current information on the following items which all have expiration dates as well. Here are 4 items that are good for 90 days, after which you will need to supply new documentation:

  • Income: Pay Stubs
  • Assets: Checking, Savings, Investment, Retirement
  • Credit: Must be re-pulled after 90 days but should not be re-pulled until needed (communicate with loan officer)
  • Appraisal: Good for 120 days before a new appraisal is required

The timing on these documents can create issues.  

If there is any change in employment status, let your loan officer know immediately. This is a MAJOR issue that will need to be addressed so you know what your options are moving forward.

Statements for your assets vary in terms of dissemination. A lot of real estate is about timing. Speak with your loan officer regarding the current statement for your investment and retirement funds. Checking and savings generally comes out monthly.

ALL loan approvals are at risk if the borrower ruins their credit, loses or quits their job or if they spend their down payment money.  This is true whether their Commitment Letter is issued 3 weeks prior to the closing or 3 months. Essentially, we advise our clients not to change anything in their life until the transaction is complete. Do not make any major purchases to alter your credit (I have seen client’s credit score drop as a result of a purchase and the reduced score disqualified them from purchasing. thankfully, the seller was flexible and we were able to extend the dates but this is few and far between)

We hope you found this little tidbit helpful.

As always – if you have questions, thoughts or concerns about the timing of a transaction, give us a call and we will coordinate with your loan officer to walk through the scenario with you to find a solution that is beneficial for everyone. Please feel free to reach out at 617-297-8641 or Contact@mandrellco.com.

Read more

How long will mortgage loan rates stay at historic lows? Is now a good time to purchase a home? Should I refinance my existing mortgage? These are the questions everyone is asking. No one knows (outside of the FED) where rates are headed but common sense should tell us they can’t get much lower than they are currently. If you’re thinking of making a move….now would be a good time.

Here are the national average mortgage rates for this week.

  • 30-year fixed-rate mortgage (FRM) averaged 3.94 percent with an average 0.6 point for the week ending August 13, 2015, up from last week when it averaged 3.91 percent. A year ago at this time, the 30-year FRM averaged 4.12 percent. 
  • 15-year FRM this week averaged 3.17 percent with an average 0.6 point, up from last week when it averaged 3.13 percent. A year ago at this time, the 15-year FRM averaged 3.24 percent. 
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.93 percent this week with an average 0.5 point, down from last week when it averaged 2.95 percent. A year ago, the 5-year ARM averaged 2.97 percent.
  • 1-year Treasury-indexed ARM averaged 2.62 percent this week with an average 0.3 point, up from last week when it averaged 2.54 percent. At this time last year, the 1-year ARM averaged 2.36 percent. 

To give you an idea of where rates currently stand, compared to years past, we’ve provide you with the chart below.

Boston Mortgage Rates By Decade

Read more

One of the largest obstacles between you and home ownership is coming up with enough money fund the required mortgage down-payment.  Let’s assume that we’re looking for the average single family home in Massachusetts which is roughly $350,000. Let’s also assume you are like the majority of home buyers in this state and qualify for an FHA Loan, which is a 3.5% down payment or roughly $12,250. This isn’t amount of money most people have sitting in there bank accounts. So how do you find the cash to fund your dreams of home-ownership? Here are a list of things most buyers do to save up some cash:

Side Job or Temp Work –  Can you pick up a side job or work for a temp agency?  It’s may not be something you  ant to do permanently, but it’s worth it to reach your home-ownership goals.  Let’s assume you can pick up a part time job working 10 hours per week at $15 per hour. If you worked 48 of 52 weeks in the year you’d have an extra $7200 (before taxes) to add to your home savings account.

Cut Cable & Phone Bill – Many of us have Comcast or Verizon packages that consist of every movie channel, sport package and various other upgrades. Are these things we can live without for a little while?  The same goes for many phone bills. Many of us are paying $40 per month or more for data packages while the only thing we do with our phone that require data is posting to Facebook.  If you can reduce one of these bills by $50 or two of them by $25 each, you would be saving a total of $600 for the year.

Cut Gift Spending – We all love our family and friends but could you cut back on birthday and holiday gifts for one year? I think your friends and family would stand by you if your gift were less expensive this year because you’re saving to purchase a home.  Statistics show cutting this spending out entirely can put another $600 in your pocket for the year.

Work Overtime – Are there overtime hours available at your current job? Maybe it’s time to stay late or come in early. It may be a good idea to approach your manager and see what extra hours he/she can offer you.

Save Your Tax Returns – Getting a nice check back from the government this year? Don’t view this influx of cash as discretionary spending. Many Americans look at this check(s) as chance to buy a bigger TV or various other luxuries.  Be smart and save this money for your down payment.  The big screen will look better next year in your new home.

Hang At Home – Let’s assume that you’re like most of us and you love to hang out on the weekends. If you’re spending an average of $100 per weekend (drinks, food, movies etc) and your going out every other weekend, you’re spending an average of $2600 per year on entertainment. Can you cut than down this year to just 1 weekend per month? If so you’re saving $1300 per year and you’re that much closer to you saving goals.

Cut Your 401K Contributions – I’m a big believer in saving for your retirement, but I believe even more that every individual should own their own home. It may be a good idea for you to speak with your HR department and cut down (or cut out) your retirement contributions and add those additional funds to your savings.

Ask Your Family For Help – When your family sees all the lifestyle adjustments you’ve made to save for home ownership, they will see how important it is to you and will become important to them as well.  Can they help you with your down payment?

Are you looking for more helpful home ownership tips? Like us on Facebook at https://www.facebook.com/WMandrell.

You can also connect with us on Google Plus.

Read more