If you've been following the news lately, you've heard about rising inflation. Today, inflation is at a 40-year high.  According to the National Association of Home Builders (NAHB):

“Consumer prices accelerated again in May as shelter, energy and food prices continued to surge at the fastest pace in decades. This marked the third straight month for inflation above an 8% rate and was the largest year-over-year gain since December 1981.”

As prices go up for gas, groceries and more, your wallet is likely feeling the impact. If you're thinking about purchasing a home this year you may have hesitated a time or two. Is now the right now? That depends on your current situation. Homeownership is a great hedge against the impact of rising inflation. Here's how homeownership can help you combat rising costs. 

Are you protected?

With all the talk of rising prices, there's one tool that has proven time and again to serve as a hedge—or protection—against inflation:

Owning a Home.

Real estate prices have been rising along with everything else. There are the usual factors of supply and demand, but inflation itself is impacting values too. Given rising labor and material expenses, it now costs more to build a home or replace one that's been damaged. That contributes to making existing properties more valuable too.

Here are some ways homeownership serves as a hedge against inflation.

1. As your home appreciates in value, you gain more in equity, yet your costs remain relatively stable.

2. For most homeowners, the increases in home values far outpace the increased costs of other goods. For example, you may be spending $4,000 for gas this year instead of the $2,000 it cost last year. Yet if you own a home that was worth $300,000 last year, it may be worth $360,000 this year as values are up more than 20% nationally.

3. Increases in value are not money in your wallet, though you may be able to access cash through a home equity loan or line of credit. Otherwise, you can realize the benefits when you sell or refinance your home.

4. Many owners reduce their housing costs through tax deductions. (Always consult with a tax advisor.)

5. Homeowners often avoid capital gain taxes, and even for real estate investors, taxes on gains are deferred until sale.

If you're not yet hedging your purchasing power with a home of your own, there may still be time to act before costs increase further.

Please reach out if we can assist you or someone you know.

Changes are coming to medical debt reporting on consumer credit histories. In fact, credit scoring is changing to help consumers – specifically those with medical debt. That's not something you hear every day! Could a change in medical debt reporting help you? Read on for what borrowers should know about changes to how medical collections debt is reported.

Medical Debt is a Huge Element of Consumer Debt

When you think of consumer debt, overspending on credit cards may come to mind first. However, according to Consumer Financial Protection Bureau research, there’s $88 billion in medical debt on consumer credit records as of last June. COVID-19 sure hasn’t helped. Those with excellent credit records are sometimes dragged down by medical debt, too.

Having a debt in collections can eat away at your credit score by 100 points. Keep in mind, that these new changes will not erase medical debt. You're still responsible for paying it off. 

What You Need To Know

The three primary credit repositories (Equifax, Experian and TransUnion) have agreed to changes that will wipe approximately 70% of medical collection debt from consumers' credit files. Here's what you need to know.

As of July 1, 2022:

1. Medical collection debt will be removed from credit reports after it has been paid. Typically, debt sent to a collection agency remains on a report up to seven years.

2. Negative reporting for unpaid accounts will appear on reports only after 12 months have passed. This gives consumers extra time to finalize questions with providers and insurers before the debt affects their credit rating.

3. Medical collection accounts below $500 will not be included on reports at all.

Bottom Line

If you or someone you care about has been denied credit or paid more due to a low credit score impacted by medical collection debt, it may be time to try again.

Please reach out with questions or to see if these changes may improve your credit scores. And if you know of anyone else who could benefit, please pass the information along or let us know. The Greenway Team is happy to help.

Many homeowners refinance to pay off debt that has built up over time, such as credit cards and auto loans. If you find yourself struggling with high-interest debt, you’re not alone. According to Experian, the average American household has $92,727 in personal debt.

For homeowners, the good news is that you can use a cash-out refinance to pay off debt. With a cash-out refinance homeowners get a mortgage for more than they owe on the home. In turn, they can take the difference in cash and pay off high-interest debt with it, which helps them to save more money over the long term.

Mortgage interest rates can be an amazing bargain compared to consumer and installment rates. Total interest, total term, and cash flow savings can be significant with the right plan.

Consolidating multiple debts into one home loan is not for everyone. For instance, using your equity to have the equivalent of a 30-year car loan is rarely a great idea. But it may work if you have the discipline to take advantage of a low rate to speed up—rather than slow down—payment terms. Consolidation can make debts disappear with less total interest expense than they would otherwise.

Homeowners’ Equity is On the Rise

Now could be a great time to cash-out home equity and pay off debts. According to CoreLogic, equity levels rose by nearly 30% between 2020 and 2021. Plus, believe it or not, mortgage rates are still low. Qualified homeowners may be able to significantly lower their debt payments and increase their monthly cash flow by using a cash-out refinance.

Homeowners looking to refinance to pay off debt must make sure they have enough equity. For instance, if 80% of the home’s value is owed after you refi, you’ll have to buy mortgage insurance. This is something you’ll want to avoid.

How to Calculate Your Loan to Value (LTV)

How is an LTV calculated?  Simply divide your current mortgage balance by the approximate value of your home to get your loan to value ratio.

How to Qualify for A Cash-Out Refinance

Lenders usually check to see that you have a credit score of 620 or higher and enough equity in your home that you can keep 20% equity after the refinance.

Reason to Use a Cash-Out Refinance to Consolidate Debt

One of the main reasons homeowners consider using a cash-out refinance to consolidate debt is that you can typically get a lower rate on a mortgage loan than you can with personal loans. Some other benefits can include:

• Paying off high-interest debt faster
• Frees up extra cash for other expenses
• Consolidating debt makes it easier to manage monthly payments
• Mortgage Interest may be tax-deductible (always consult a tax or financial planning professional to discuss your specific situation)

Bottom Line:

If you have high-interest debt hanging around and eating away at your monthly budget, a cash-out refinance may be the solution you’re looking for. This will allow you to reduce your monthly payments but also frees up extra money for living expenses, savings, and beyond.

Questions?

Talking about your options with a member of our dedicated loan team can help you make the best decision for your specific scenario. Speak with one of our expert Loan Officers to explore what a good consolidation plan could mean for you.

For More Information Check Out These Blogs:

• Benefits of A Cash-Out Refinance
• HELOC vs. Cash-Out Refinance

They did it again!

In an effort to quell inflation, the Fed increased policy rates by 0.75% at their most recent meeting. This is the largest increase since 1994 and more than initially expected. Mortgage interest rates had already moved upward in anticipation.

What's next?

It is expected the Fed will continue moving rates on an upward path at each successive meeting of the Open Market Committee, so long as conditions warrant. Most analysts anticipate the increases will continue until the Fed has met its directive of containing inflationary forces in the economy.

Background on the Fed:

• The Federal Reserve Board (the Fed) controls the federal funds rate and discount rate, which are charges for overnight loans from bank to bank or from the Fed to member banks.
• The rate was lowered to near zero in March 2020 in response to the pandemic. These historic measures are now being reversed.
• This is the third increase this year.

What this may mean for you:

If you are planning a home purchase or any type of refinancing, including accessing cash from your home’s equity, it may pay to act before further increases. You may want to explore alternatives, such as a lower rate, hybrid adjustable mortgage (ARM) or home equity line of credit (HELOC).

The Greenway Team monitors interest rates and the markets every day.

Please reach out if I can answer questions or be of service to you or your friends and family. We are happy to help.