Wednesday, February 26, 2020 / by Nicole Merwin
The advantages of a 15-year loan over a 30-year include the obvious shorter term, usually a slightly lower interest rate and that equity builds faster. The disadvantages are higher payments that are required regardless of temporary personal economic conditions.
If a borrower is experiencing unexpected expenses that make it difficult to make the higher payments on the 15-year loan, there is no option to make a lower 30-year payments until the situation improves.
The borrower could have originated a 30-year loan but make payments like it were a 15-year loan. The additional amount would be applied to the principal which would still save interest, build equity faster and shorten the term of the mortgage. The big difference in this scenario is that the higher payment is optional.
If the situation arises, the borrower is only obligated to make the 30-year payment. When the situation improves, the borrower can resume the higher payments to re ...
Thursday, February 6, 2020 / by Nicole Merwin
House-hacking refers to buying a multifamily property on an owner-occupied mortgage, living in one unit and renting the others. If you're thinking about becoming a rental mogul, starting early is an advantage. Not only will you have longer to accumulate a larger portfolio, you can increase the leverage on the first acquisitions if they are owner-occupied.
Leverage is the use of other people's money to finance an investment. The higher the loan-to-value, the greater the leverage which can increase the yield.
A $200,000 rental property with an 80% LTV at 4.5% for 30 years producing a 16.88% before-tax rate of return would increase to a 23% return on investment by increasing the mortgage to 90%. A typical down payment on an investor property in today's market is 20-25% but, in some cases, a higher loan-to-value is possible.
Owner-occupied, multi-unit properties, two to four units, allow a borrower to occupy one of the units and rent the ...
Wednesday, February 5, 2020 / by Karen Degney
Sometimes, there can be confusion on what goes with the house and what goes with the seller when they move. Generally speaking, the house is the land and buildings and any fixed or attached property.
Permanently installed and built-in items are considered real property. Some things are obvious such as built-in appliances, wall-to-wall carpeting, light fixtures including chandeliers, shrubbery and landscaping, and window shutters.
One indication is that if the item was removed, there be evidence that it was missing. For example, if there was a wall mounted TV in the home, the TV is personal property, but the TV wall mount is real property.
Factors that determine if something is permanently installed or built-in would be:
Was the installation intended to be permanent?
How is the item attached and will the surrounding property be damaged if it is removed?
Is the item made specifically for the property?
Personal property examples would ...
Monday, January 27, 2020 / by Nicole Merwin
If you have a mortgage on your home, your total house payment may include 1/12 the cost of the annual taxes and insurance. Those amounts are held in an escrow account so the lender can pay them when they become due.
The most common reason an escrow account shortage occurs is that taxes and insurance premiums increase, and the amount being collected isn't enough to pay them when they become due.
As an example, let's say the taxes increased and there was a $600 shortage. The lender will probably give the borrower the option to pay the $600 in cash or adjust the payment to cover the shortage. If the borrower chooses the increased payment, it will be increased not only $50 to cover the shortage from last year but another $50 a month to pay the increased amount for the coming year.
Regardless of which option the borrower takes, their payment will increase. If they pay the shortage in cash, the payment still must go up to cover the i ...
Thursday, January 23, 2020 / by Nicole Merwin
Now that the standard deduction is increased to $12,200 for single taxpayers and $24,400 for married ones, many homeowners are better off with the standard deduction than itemizing their deductions to write off their mortgage interest and property taxes. There was some speculation that without the tax advantages, homeownership is not the investment it once was.
By looking at the other benefits, you can see that homeownership is still one of the best investments people can make.
A $275,000 home financed with a 4.5%, 30-year FHA loan would have an approximate total payment of $2,075. The difference in the value of the home and the amount owed on the mortgage is called equity. Two things cause equity to increase: the home appreciating in value and the principal loan balance being reduced with each payment made on an amortizing loan.
In this example, if the home were appreciating at 2% annually, the value would increase by $5,500 the first year which would be $458.33 p ...