Blog – Page 9 of 838 – Mike Pfefferman

21

Oct

Financial Reports

What’s Ahead For Mortgage Rates This Week – October 21st, 2024

The release of last week’s inflation data has left this week with very few significant data updates. The most important information will come from various Federal Reserve members speaking on different topics. They have consistently emphasized that they will closely monitor the data to decide whether further rate cuts are needed in their upcoming rate decision meeting. Much of the market is optimistic that rate cuts will continue. Additionally, several smaller retail sales data releases are expected soon, which will provide insight into the current strength of the economy.

Retail Sales

Retail sales increased 0.4% in September, with strength in a broad range of categories that overcame weak gas and auto spending, the U.S. Commerce Department said Wednesday. Economists polled by the Wall Street Journal had forecast a 0.3% gain.

Primary Mortgage Market Survey Index

15-Yr FRM rates saw an increase of 0.22% with the current rate at 5.63%
30-Yr FRM rates saw an increase of 0.14% with the current rate at 6.44%

MND Rate Index

30-Yr FHA rates saw a 0.01% increase for this week. Current rates at 6.13%
30-Yr VA rates saw a 0.01% increase for this week. Current rates at 6.14%

Jobless Claims

Initial Claims were reported to be 241,000 compared to the expected claims of 260,000. The prior week landed at 260,000.

What’s Ahead

A surprisingly light week ahead once again, with only the Federal Reserve’s Beige book and S&P Preliminary numbers for the Producer Manufacturing Index.

18

Oct

By Mike Pfefferman

Home Mortgage Tips

Is a Cash-Out Refinance the Answer to High Credit Card Bills?

If your credit card debt is piling up, a cash-out refinance could be the solution you need to manage your financial situation. By leveraging the equity in your home, you can consolidate your high-interest debts into a lower-interest mortgage, potentially giving you relief from hefty monthly payments.

How a Cash-Out Refinance Works

A cash-out refinance allows you to replace your existing mortgage with a new one that’s higher than what you currently owe. The difference is then provided to you in cash, which you can use to pay off your credit card debt or other high-interest obligations. Here’s a breakdown of the process:

Apply for a refinance: Contact a mortgage lender to initiate the refinance process.
Home appraisal: The lender will arrange for an appraisal of your home to determine how much equity you can borrow.
Loan approval: You can typically borrow up to 80% of your home’s equity, minus what you still owe on your mortgage.
Pay off debt: Once the loan is approved, the funds are used to pay off your credit card and other high-interest debts.
New mortgage payments: You then begin making monthly payments on your new mortgage, which generally carries a lower interest rate than credit cards.

Benefits of a Cash-Out Refinance for Debt Consolidation

Lower Interest Rates: Mortgage interest rates are usually much lower than those on credit cards. By consolidating your debt, you could significantly reduce the amount of interest you pay each month.
Simplified Payments: Instead of juggling multiple credit card bills and loan payments, you’ll only need to make one payment each month for your mortgage. This can help streamline your budgeting and reduce the chances of missing payments.
Potential Credit Score Boost: Paying off high-interest debt like credit cards can improve your credit score over time. This could lead to better loan offers in the future.

Risks to Consider

While the benefits are appealing, there are some risks to weigh carefully:

Potential Home Loss: Since your home serves as collateral, failing to make mortgage payments could result in foreclosure, putting your home at risk.
More Interest Over Time: If you opt for a longer-term mortgage to lower your monthly payments, you could end up paying more in total interest over the life of the loan.
Reduced Home Equity: Tapping into your home’s equity reduces the amount of value you have built up. This could affect your ability to sell the home or secure future loans.

A cash-out refinance could be a smart way to gain control over your credit card debt and consolidate it into a lower-interest mortgage. However, it’s important to fully understand both the short-term and long-term consequences, particularly when it comes to your home’s equity and potential interest costs. Consulting with a financial advisor or mortgage professional can help you make the right decision for your situation.

17

Oct

By Mike Pfefferman

Mortgage Tips

Shared Equity vs. Traditional Loans

When it comes to purchasing a home, most buyers tend to opt for traditional financing methods like Conventional, FHA, or VA loans. These tried-and-true options have been the cornerstone of home financing for decades. However, an alternative called a Shared Equity Agreement (SEA) is also available, which some may find appealing. Let’s discuss what a Shared Equity Agreement is and why traditional financing options are often a better choice for homebuyers.

What is a Shared Equity Agreement (SEA)?

A Shared Equity Agreement is essentially a partnership between a homebuyer and an investor. In this arrangement, the investor provides a portion of the funds needed to purchase the home. In return, the investor receives a share of the home’s future value once it is sold. Both parties benefit if the home’s value increases over time, but it also means the homeowner shares any profit from the sale with the investor.

In simple terms, a SEA is a way to reduce the initial financial burden of buying a home by splitting the investment with an outside party. But this comes with a significant trade-off—sharing the potential future value of your property.

How Does a Shared Equity Agreement Work?

Here’s a simplified explanation of how a SEA functions:

Investment: The investor contributes part of the down payment or purchase price.
Ownership: The homeowner lives in the property, maintains it, and covers typical ownership responsibilities.
Profit Sharing: When the home is eventually sold, the investor receives a percentage of the sale price based on their initial investment.

While this may sound appealing to some, especially first-time homebuyers, it’s essential to consider the long-term costs and implications of this type of arrangement.

Comparing SEAs to Traditional Financing Options

While SEAs offer an innovative approach to homeownership, traditional financing options like Conventional, FHA, or VA loans are generally more advantageous for a variety of reasons. Let’s break them down:

Conventional Loans

Lower Overall Costs: With a conventional loan, homeowners only pay interest on their loan but keep all of the profits when they sell. There’s no need to share the appreciation with an investor.
Stability: Conventional loans often come with fixed interest rates, which means your monthly payments stay the same over the life of the loan, providing financial predictability.

FHA Loans

Accessibility: FHA loans are tailored for first-time homebuyers or those with lower credit scores, making homeownership more accessible without needing an investor.
Lower Down Payments: FHA loans require lower down payments (as low as 3.5%), which can reduce the financial barrier to entry while still allowing you to maintain full ownership.

VA Loans

No Down Payment: For eligible veterans, VA loans offer the benefit of no down payment, making them an excellent choice without the need to partner with an investor.
Competitive Interest Rates: VA loans typically have lower interest rates, reducing the long-term cost of homeownership even further.

Why Traditional Financing is Usually Better

There are several reasons why traditional financing options are generally a better route for most homebuyers:

Full Ownership: With traditional loans, homeowners retain full ownership and control over the property, which includes any increase in its value.
Lower Long-Term Costs: While you’ll pay interest with a traditional loan, you won’t have to share any future profits, which can result in lower long-term costs.
Stability and Predictability: Fixed-rate mortgages provide steady monthly payments, allowing homeowners to plan their finances more effectively over time.

Shared Equity Agreements offer an alternative to traditional loans by partnering with an investor. While this may help with upfront costs, the long-term benefits of traditional financing generally outweigh the advantages of a shared equity arrangement. Conventional, FHA, and VA loans offer homeowners full control, lower long-term costs, and more financial stability. By opting for traditional financing, you can retain full ownership of your home and reap the rewards of its future value.