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Are you feeling overwhelmed by debt? You’re not alone. In fact, many American households are dealing with credit card debt on top of their mortgages, student loans, car loans, medical bills, and the list goes on.

THE GOOD NEWS

For homeowners, the good news is that you may be able to make the debt you have more manageable by refinancing your mortgage. Why? A refinance can help you consolidate your debt by capitalizing on low mortgage interest rates while tapping into your home’s equity.

HOW CAN A REFINANCE HELP PAY OFF DEBT?

Are you familiar with cash-out refinances? We’ve talked about cash-out refinances in the past, but in case you forgot what it is, a cash-out refinance is a type of mortgage refinance that allows homeowners to consolidate debt. This process allows you to borrow money from the equity you have in your home and use that to pay off other debts like credit cards, student loans, etc. Basically, you are paying off any existing balances by transferring them to your mortgage, placing all balances into one debt. This results in only having to make one mortgage payment.

SHOULD YOU REFINANCE YOUR MORTGAGE TO CONSOLIDATE DEBT?

Reach out to one of our local loan experts to discuss your options. When determining if a cash-out refi is best for you, here are some questions to ask yourself:

1. Do I have enough equity?

You will need to have enough equity to borrow while keeping some remaining in the home. The amount of equity you leave in your home after a refinance is important because it affects your loan-to-value (LTV). 

An LTV determines if you need Private Mortgage Insurance (PMI), which can cost hundreds on your monthly mortgage payment. Keep in mind that if your LTV is higher than 80%, you may be required to pay this insurance. To avoid paying for private mortgage insurance, your LTV after you refinance needs to be at 80% or lower. Here’s an example of how you can easily calculate your LTV before you refinance:

Let’s say your home is worth $500,000 and your loan balance is $250,000. Your LTV would be 50%.

  • Property Value = $500,000

  • Loan balance = $250,000

  • 250,000/500,000 = 0.50

To figure out how much your LTV would be with a cash-out refinance, simply add the amount of equity you want to borrow to your current loan balance, then divide that by the appraised value of your property. For instance, say you want to borrow 10,000 to pay off your credit card debt, your new loan balance would be $260,000 and your new LTV after your cash-out refinance would be 52%.

  • Property Value = $500,000

  • Loan Balance = $250,000

  • Cash-out amount borrowed = $10,000

  • New loan balance - $260,000

  • 260,000/500,000 = 0.52

With a 52% LTV, you could do a cash-out refinance with enough equity leftover to avoid PMI.

2. Can I afford a higher monthly mortgage payment?

Refinancing does not get rid of debt. However, it transfers it over to another debt also known as your mortgage. When you refinance your mortgage, your balance increases by the amount of equity you borrowed. It’s important to understand that no matter how much debt you transfer, increasing your mortgage balance will in turn increase your monthly mortgage payment.

3. Does the cost of the mortgage make sense compared to other options?

Do you remember paying closing costs on your original mortgage? Well, you will also need to pay these costs on a mortgage refinance. There may be some additional costs included as well – speak with your loan officer for more details.

If you think a mortgage refinance is right for you, reach out to one of our local loan experts. We will review your current mortgage and see what the next best step is. If you’re ready to get the process started, get a free pre-approval today. This process takes less than 5 minutes and you can do it from your phone! Click here.  If you prefer to speak with one of our Loan Officers, we would be happy to help! 908-489-4658. 

We know this is a big financial decision, and we want to make sure you make the best decision possible.

 


For the Week Ending October 25, 2019

 

Please enjoy this quick update on what happened this week in the housing and financial markets.

September's factory orders for big-ticket manufactured goods tumbled by the largest amount in 4 months, indicating continuing struggles in the industry.
Stocks improved this week as corporate earnings results helped investors shrug off signs that global growth is losing momentum.
Despite an overall slowing economy, jobless claims fell last week. A strong labor market boosts consumer confidence and the economy.
The FHFA reports home prices rose 0.2% in August from July and were up 4.6% year-over-year. 
New home sales fell 0.7% in September, as low inventories continue to weigh on sales. The median new home price is $299,400, an 8.8% drop from a year ago.
The latest housing trend is backyard "accessory dwelling units," small second homes used for rentals or additional guest living space.

Rate movements and volatility are based on published, aggregate national averages and measured from the previous to the most recent midweek daily reporting period. These rate trends can differ from our own and are subject to change at any time.


What is a USDA Loan?

A USDA loan is a mortgage loan backed by the U.S. Department of Agriculture (USDA). In fact, they are available to millions of primary home buyers in eligible areas. So, if you’re looking to buy a home, this might be the right mortgage choice for you.

Don’t let the term “rural” fool you. This type of loan is available in many suburban areas as well. Most of the country is in what the USDA considers a qualified rural area. But, it’s still important for prospective buyers to check a home’s eligibility status before going too far! To see if a property is eligible check out the USDA Property Eligibility Map Here. (Note: the USDA updates its list of eligible rural areas annually).

WHY USDA?

One of the advantages of a USDA loan is that it requires no down payment. You can finance up to 100% of the property value. More advantages include:

  • No Down Payment (100% financing)
  • Lower-Than-Market Interest Rates
  • Low Monthly Private Mortgage Insurance (PMI)
  • Flexible Credit Guidelines
  • Ability to Finance Upfront PMI

First-Time Home Buyers

A USDA loan is great for first time home buyers that often have little money to put down on a home. The USDA mortgage is 100% financing with secure 30-year fix rate terms.

However… it’s not JUST for First-Time Home Buyers

You do not have to be a first-time home buyer, but you have to agree to live in the property as your primary residence. It’s essential to find the neighborhood in the ideal location with the amenities that best fit you and your family whether you’re looking for a home in a rural area or not.

Tips to Finding the Perfect Neighborhood:

  • Make of list of the activities (movies, health clubs, churches – you engage in regularly and stores you visit frequently. How far would you travel from each neighborhood to engage in your most common activities?)
  • Check out the school district
  • Check crime
  • Look for economic stability
  • Consider resale value
  • Do a walk-through of each neighborhood

Ready to take the next step?

A pre-approval should always be step #1. Click below to get started or visit our website here to learn more about USDA Loans. If you have any questions contact us today 732.832.2967.


When Life Threw this Family Curveballs, Greenway Was Ready

Christine and Dan Kritch and their 3-year-old daughter, Kierstin, lived in a house built in 1922. The house was nestled on a beautiful half-acre lot in a great neighborhood but, like many older homes, it had very small rooms and just one bathroom. The Kritches made the difficult decision to sell their house so they could move into a larger home in a nearby town and enroll Kierstin in a better school system.

The Kritches contacted Erin Carvelli at Greenway Mortgage. Erin had helped Dan with the purchase of his first home years earlier. The Kritches planned to go the conventional route, using the money from the sale of their home to make a down payment on a new home. They were pre-approved for a $600,000 purchase mortgage and put their house on the market.
 
And on the market their house sat. For nine months.
 
There were plenty of showings, but they received just one low-ball offer. After some negotiation, the Kritches weren’t able to reach an agreement with the buyer. They dropped the price a few times, but the house still hadn’t sold. Buyers were walking away for the same reason the Kritches were prepared to walk away – small rooms and one bathroom.
 
Erin sat down with Christine and Dan to discuss their options.
 
“We decided to stay in the house and do some renovations to make the house work for us,” Christine said. “We like the area and the size of the property, and we had the option to enroll Kierstin in a private school, but we needed money to pay for the renovations.”
Those renovations would be extensive – and expensive. The Kritches wanted to build an addition with a living room on the first floor and a master suite on the second floor. They also wanted to add a half bath, convert one of the small bedrooms into a laundry room, and add another bedroom on the second floor.
 
 
After Erin explained the various loan products and options, the Kritches decided to look into a renovation loan. With a renovation loan, the appraisal is based on the future value of the home once renovations are complete. This can be a great option for homeowners who don’t have enough equity in their home.
 
However, there are additional costs and requirements with this type of loan. Erin processed the mountain of paperwork that comes with a renovation loan, but they hit another roadblock.
 
“There was a lot of back-and-forth with the contractor to understand how to comply with the loan requirements,” Christine said. “But when we saw what the monthly payments would be, we knew we had to come up with another option.”
 
Fortunately for the Kritches, an “as-is” appraisal came in higher than expected, so they wouldn’t need to use the future value of the home to secure a renovation loan. Erin told them that they had enough equity for a cash-out refinance.
 
This would allow them to refinance what they owed on their existing mortgage while turning much of the equity into cash to pay for the renovations. A cash-out refi would also accelerate the renovation timetable and save the Kritches a lot of money each month. Once they decided to go with a cash-out refi, the process moved quickly and the loan closed with no issues.
 
Of course, it took about 18 months to get from the initial discussions about buying a new home with a conventional mortgage to finalizing the cash-out refi and staying put. Erin was there every step of the way.
 
“Erin was like my BFF for a year and a half,” Christine joked. “I was constantly calling, emailing and texting her – everything but FaceTime. Erin replied every single time. She went above and beyond whenever a new issue came up, and she always had the information we needed to keep us on the right path.”
 
Christine and Dan had a plan when this process started. But, as we all know, sometimes life doesn’t care about your plans. Life throws curveballs. That’s when it helps to have people in your corner who you can trust to help you through the rough patches.
 
As of this writing, demolition is just about done, and the remodeling and rebuilding is about to begin. Ultimately, the end result will be what the Kritches wanted – a larger home in an area they like, and good schools for Kierstin.
 
“After we closed on the loan, it almost felt odd to not be in contact with Erin every day,” Christine said. “She has the patience of a saint and the knowledge to put my mind completely at ease. My family is very happy, and I can’t recommend Erin strongly enough.
 


For the Week Ending October 18, 2019

 

Please enjoy this quick update on what happened this week in the housing and financial markets.

Retail sales declined unexpectedly in September, the first time in 7 months. The report could signal the economy is softening, possibly helping keep rates low.
A Phase I trade deal with China was agreed upon, though not yet signed. A finalized deal would eliminate some of the economic uncertainty that has contributed to lower rates.
Jobless claims rose marginally last week, suggesting the labor market remains strong despite an overall slowdown in hiring and prospects of a weaker economy.
Home builder confidence surged to the highest level in nearly 2 years in October, attributed mainly to lower mortgage rates bringing in buyers and boosting sales.
Although housing starts fell 9% in Sept., a surge in permits suggests the decline is just a brief pause. Single-family construction rose for the 4th straight month.
The housing market was the bright spot in the Fed's monthly economic snapshot. The Fed also noted that tight inventory is placing a strain on home sales.

 

Rate movements and volatility are based on published, aggregate national averages and measured from the previous to the most recent midweek daily reporting period. These rate trends can differ from our own and are subject to change at any time.

 


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