Monday, May 08, 2017 / by David Veenstra
Interest rates are still low. Your current home interest rates are higher than the interest rate today, Should you sell and buy a different home that better suits your needs? Should you refinance to take advantage of the lower interest rates? Here are a few things to consider.
Why might you consider selling your Kalamazoo area house and buying a different one?
- Get a home that better suits your current needs/wants while keeping your monthly costs about the same. In some cases you can purchase a new house with a new mortgage and end up with money in your pocket. We recently helped a family sell their home, purchase a much bigger house for their family, lower their interest rate, keep their monthly payment about the same AND they walked away with almost $15,000 in cash.
- Get a home that better suits your current needs/wants while shortening the term of your loan, so you save thousands of dollars over the long haul.
- If you downsize, you may be able to eliminate your mortgage payment altogether by paying cash, and, in addition, right size your home for your circumstances
- Get a home that better suits your current needs/wants while lowering your payment to reduce your monthly cost of housing.
- Get a home that better suits your current needs/wants while converting an Adjustable Rate Mortgage (ARM) to a Fixed Rate Mortgage (FRM) to stabilize your payment due to concern of rising interest rates.
- If you take advantage of the rising home values, you may discover that you may have equity to cash out that will allow you to purchase more house that better suits your current needs/wants while
- Get a home that better suits your current needs/wants while paying off a first and second mortgage.
- Settling a divorce decree by selling a home and then getting a home that better suits your current needs/wants.
In most of the above scenarios, you need some additional information to determine whether selling and buying makes both fiscal and practical sense. You will need to know 1) what your home is worth 2) what homes are available at what price points 3) what you may need/want to do to your house to get the best value 4) the costs associated with selling your home an buying another. The Veenstra Team is happy to provide you with a free consultation to help you determine whether a move makes sense for your family. You can call us at 269-350-5514 to schedule the free, no obligation consultation.
Why might you consider refinancing your Kalamazoo area house?
- Lower the rate
- Shorten the term so that the loan will build equity faster and be paid off sooner.
- Lower your payment to reduce your monthly cost of housing.
- Convert an Adjustable Rate Mortgage (ARM) to a Fixed Rate Mortgage (FRM) to stabilize your payment due to concern of rising interest rates.
- Cash out equity to be able to use the money for another purpose.
- Combine a first and second mortgage.
- Consolidate personal debt so the interest is tax deductible.
- Payoff higher cost debt such as credit cards, student debt, etc.
- Remove a person from a loan as in the case of a divorce.
Regardless of the reason to refinance your Kalamazoo area home, the basic question to ask is: “Do you plan to live in the home long enough to recapture the cost of refinancing?” There are always expenses involved in refinancing which can be paid in cash or rolled into the new mortgage. You should call a lender to determine the actual cost of refinancing including the fees. From a strictly financial standpoint, the break-even point is achieved when the cost of refinancing has been recaptured by the monthly savings. For example, it would take approximately 23 months to recapture $4,000 of refinance costs with a lower payment of $175 a month.
Points paid to purchase a principal residence are tax deductible completely in the year paid. However, the points must be spread over the life of the mortgage on a refinance. For that reason, consider getting a “par” value loan with no points. It may have a slightly higher rate but the interest will be fully deductible and it will lower the cost of refinancing. (Think of par as the base. It's the interest rate without any points, or money you pay to lower the rate at closing. For example, an interest rate at par may be 4 percent plus zero points. The lender may offer you the interest rate below par at 3.5 percent plus two points. Each point is equal to 1 percent of the loan amount. If you want to pay the two percent of the loan amount at closing, you'll get the 3.5 percent interest rate. If you opt for an interest rate above par, such as 4.5 minus 2 points, you can take the 4.5 interest and receive 2 percent of the loan amount back as credit at your closing.)
Determine the break-even point on your situation by using the Refinance Analysis. Call the Veenstra Team for a recommendation of a trusted mortgage professional who will be happy to explain the options to you.
Information is power. Get the information you need to make the best choices for your family. The Veenstra Team is ready to serve and will help you meet your goals.
Evenboer Walton REALTORS
David Veenstra, REALTOR
Jason Veenstra, REALTOR
Cindi Veenstra, Licensed Office Manager
Email: Sold(at sign)VeenstraTeam.com