Real Estate Information Archive

Blog

Displaying blog entries 1-10 of 28

HELOCs Becoming More Expensive

by The Mike Parker Team

In September, the Federal Reserve raised interest rates for the third time in 2018 and they're expected to go up one more time this year and three times next year.  If you have a Home Equity Line of Credit, HELOC, you're paying more to use that money and it is going to become more expensive.

It may make sense to refinance your home and consolidate the balance of your HELOC to lock in a lower mortgage rate.  Most lenders require that the combination of these loans should not exceed 80% of the home's fair market value and that you have good credit and adequate income to support the payment.

A HELOC is a first or second mortgage that allows the borrower to withdraw money as needed, up to the line of credit provided by the lender.  A draw period is established where the borrower is only required to pay interest. 

Since all HELOC loans are variable rate mortgages, during periods of rising rates, the cost of the funds increase.  However, unlike adjustable rate mortgages that have specified adjustment periods and caps, a HELOC adjusts when the prime interest changes.

The formula for determining available funds on a refinance are to take 80% of the fair market value, which will probably have to be verified by appraisal, less the existing first mortgage and the costs to refinance.  The balance would need to cover the cost of replacing the HELOC.  Any remaining balance may be available for cash to be taken out.

Now is a great time for a mortgage review. In many cases, the equity you have in your home may allow you to eliminate mortgage insurance and substantially lower your monthly payment. As with all tax matters, always consult with a tax professional before making any decisions.  Call us at (859) 647-0700 for a recommendation of a trusted mortgage professional.


A Home for Tomorrow

by The Mike Parker Team

As people near or enter retirement, one of the decisions that typically comes up is whether to sell their "big" home and buy a smaller one. If you know anyone who has been faced with that situation, selling one home and buying a smaller one may not save enough money to make it worthwhile.79996505-250.jpg

There are sales expenses on the property being sold and acquisition costs on the replacement home. Generally speaking, homeowners may not mind a home with less square footage, but they usually don't want to give up amenities or locations that they've become accustomed.

After a little number crunching, the move may not make enough difference in savings and they end up staying in their current home even if it doesn't fit their needs anymore.

What if while this couple were still in their peak earning years, they acquired a home in an area where they would consider retiring and rent it during the interim. They could put it on a 15-year mortgage and possibly, even accelerate the principal payments to have it paid off by their anticipated move.

In the meantime, they could continue living in the "big" home until it is time to make the transition. Sell the "big" home that may be paid for by then and avoid up to $500,000 of capital gain. Take part of the proceeds and remodel the rental/transitional home and invest the proceeds for retirement income.

Ideally, the former rental would be mortgage free by this point, so the retirees would not have a house payment. Even if at this point, they changed their mind about retiring to this particular home, they still have a property that acted as a hedge against rising prices and have sufficient equity to purchase something else without using the proceeds from the "big" home.

It is difficult to know what the situation will be years from now when a person retires. It is clearly advantageous to have a plan that allows for options and choices. To find out more about purchasing your retirement home today, give me a call at (859) 647-0700.

Assumptions May Be an Alternative

by The Mike Parker Team

For the last 25 years, most buyers have gotten a new mortgage or paid cash when purchasing a home. For a practical reason, owner-occupant buyers have another alternative: assuming a lower interest rate existing FHA or VA mortgage.29377293-250.jpg

In the late 80’s, both FHA and VA began requiring buyers to qualify to assume their mortgages. Prior to that, good credit or even a job wasn’t required. The real reason there haven’t been significant numbers of assumptions in the past 25 years is that interest rates have been steadily going down. If a person had to qualify, they might as well do it on a new loan and get a lower interest rate.

Even though mortgage money is currently attractive and available, it is at a four-year high. When interest rates on new mortgages are higher than the rates of assumable FHA and VA mortgages originated in the recent past, it may be more advantageous to assume the existing mortgages.  Conventional loans have due on sale clauses that prevent them from being assumed at the existing rate.

FHA loans that originated with lower than current interest rates have great advantages for buyers and sellers.

  1. Interest rate won't change for qualified buyer
  2. Lower interest rate means lower payments
  3. Lower closing costs than originating a new mortgage
  4. Easier to qualify for an assumption than a new loan
  5. Lower interest rate loans amortize faster than higher ones
  6. Equity grows faster because loan is further along the amortization schedule
  7. Assumable mortgage could make the home more marketable

This financing alternative can save money for the buyer in closing costs and monthly payments. While the equity may be more than the down payment on a new mortgage, second mortgages are available to make up the difference. Call us at (859) 647-0700 to find out if this may be an option for you. 

Easier to Play the Game

by The Mike Parker Team

It’s much easier to play a game when you know the rules so you can avoid mistakes that may keep you from winning. Homeownership isn’t a game but there are some rules that will protect your investment and increase your enjoyment.

Most people want a home of their own to raise their family, share with their friends and to feel safe and secure. In most cases, it is also their largest asset. These suggestions can help protect your investment and make homeownership more enjoyable.12519621-250.jpg

  • Don’t overpay for your home
  • Maintain your home to protect its value
  • Minimize your assessed value to lower property taxes
  • Make extra contributions to save interest and build equity
  • Validate the insured value of improvements and contents
  • Be aware of current surrounding property values
  • Make mortgage interest payments deductible
  • Invest in capital improvements that increase market value
  • Don’t over-improve the neighborhood comparables
  • Keep records of capital improvement & other maintenance

We’d like to be your personal source of real estate information and we’re committed to helping from purchase to sale and all the years in between. If you need assistance with any of the items mentioned in this article or need a recommendation for a service provider, it would be our pleasure to help.

A Lower Payment is Your Choice

by The Mike Parker Team

A Lower Payment is Your Choice

 

94% of purchasers last year opted for a fixed-rate mortgage at some of the lowest rates in home buying history.  Yet, some of them will pay more in interest than necessary based on the time they’ll own the home.

If a person only plans to be in the home a few years, the adjustable-rate can offer significant savings.

Not only is the interest rate on the adjustable-rate lower than the fixed in the initial period, amortization on a lower interest rate amortizes faster than a higher interest rate.

In the example shown below, a $200,000 mortgage for 30 years is compared using a 4.25% fixed-rate to a 3.25% 5/1 FHA adjustable rate.  The first five years of the ARM generates a $113.47 a month savings which accumulates to $6,808.20.  In addition, due to faster amortization on lower interest rate loans, the unpaid balance at the end of five years will be $3,001 lower on the ARM for a total savings of $9,801.

Assuming the adjustable-rate mortgage was to escalate the maximum allowed at each period, the breakeven would occur in 8 years and 6 months. If a person were to sell the home prior to this point, the ARM would provide a lower cost of housing for the homeowner.

For some people, the uncertainty of how the interest rate may change is not acceptable.  On the other hand, for the risk tolerant individual who may be more confident in financial matters or who may know when they’ll be moving next, the ARM can be a smart choice.

To make projections using your individual numbers, see the Adjustable Rate Comparison

Is the Window Closing?

by The Mike Parker Team

Is the Window Closing?

 

With interest rates lower than they’ve been in over 40 years, it may be difficult to think of a “window of opportunity” closing.  However, it isn’t difficult to understand that it may very probably cost more to live in a home in the near future due to rising interest rates and prices.

Zillow recently reported results from a nationwide study that home values are expected to appreciate by 4.5% through the end of the year.  Coupled with Freddie Mac’s projection that rates are going up, the cost of housing for buyers by the end of the year will be higher than it is now.

While uncertainty of the future can stagnate some people, the fear of loss can be much more devastating when a person realizes that the amount they pay to live and enjoy a home could have been considerably lower had they acted when prices and mortgage rates were lower.

The following example considers a $250,000 purchase today with a FHA mortgage compared to what it might be at the end of the year with a higher price and interest rate as discussed earlier.  The net effect is that it will cost $191.87 to live in the very same home based on the cost of waiting to buy.

To see what the cost might be for your price range, use this Cost of Waiting to Buy spreadsheet. 

Northern Kentucky Residential Real Estate Market Report

by The Mike Parker Team

10-28-13

I wanted to share some interesting numbers on the Northern Kentucky Residential Real Estate market.

When comparing where Northern Kentucky real estate market is today vs. where we were a year ago:

2012

4117 single family, condos, farms closed from the following dates 1/1/12 to 10/28/12.

Average sold price was $145,690 with 95 days on the market being the average.

2013

There are 2988 single family, condos and farms currently for sale.

  • 765 homes under contract (Pending)
  • 4803 sold from 1/1/13 to 10/28/13
  • Average sold price $155,051
  • Average days on the market -111

Within the same time frame, there were 686 MORE sales in 2013 than in 2012.

The average sales price in 2013 is $9,361 more than 2012, that is 6.1% increase.

In 2013, the average days on the market are up by 16 days over the 2012 market.

In the last 30 days there have been 372 homes (single family, condo, farm) that have gone under contract.

The Northern Kentucky market is moving.

If you have any real estate questions, feel free to contact Mike ParkerNorthern Kentucky Real Estate Expert at 859-647-0700.  Feel free to email me at Mike@MikeParker.com.

*all information taken from the Northern Kentucky Multiple Lisitng Service.

FHA MIP Release

by The Mike Parker Team

FHA MIP Release

FHA loans require mortgage insurance premium to cover a possible loss to the lender if the property has to be foreclosed and sold. The premium is substantial and eliminating the MIP would reduce the payment considerably.

 

The MIP must remain in effect for five years but after that, when the balance is 78% of the original purchase price, FHA will release the requirement and your monthly payment will go down. Since amortization is affected by interest rates, the normal time to reach this 78% point could be from 9 to 12 years at today's interest rates.

In the example below, the MIP would be released in 9 years 6 months with normal payments. An extra $100 a month would allow the borrower to reach the release point in 7 years 1 month. To reach the release point in the minimum five years, the borrower would have to make an extra $268.04 per month principal contribution.

Releasing the MIP in this example would save the borrower $177.67 per month. The borrower would also save interest, build equity and shorten the term of their mortgage. Once the MIP is released, the borrower could continue the same payment schedule to further accelerate the debt reduction.

To make some projections on your mortgage, click here.

 

 

Second Homes Treated Differently

by The Mike Parker Team

Second Homes Treated Differently

While a principal residence and a second home have some similar benefits, they have some major differences. A principal residence is the primary home where you live and a second home is used for personal enjoyment while limiting possible rental activity to a maximum of 14 days per year.

 

The Mortgage Interest Deduction allows a taxpayer to deduct the qualified interest and property taxes on a principal residence and a second home. The interest is limited to a maximum of $1,000,000 combined acquisition debt and a combined $100,000 home equity debt for both the first and second homes.

The gain on a principal residence has a significant exclusion for taxpayers meeting the requirements. The gains on second homes must be recognized when sold. Even if you sell a smaller second home and invest all of the proceeds into a larger second home, you'll need to pay tax on the gain.

Tax-deferred exchanges are not allowed for properties having personal use including second homes.

If the home is owned for more than 12 months, the gain is taxed at the long-term capital gains rate. If the home is owned for less than 12 months, the gain is taxed as ordinary income which would be a considerably higher rate.

The article is intended for informational purposes. Advice from a tax professional for your specific situation should be obtained prior to making a decision that can have tax implications.

NKYHomes.com Northern Kentucky Residential Real Estate Report

by The Mike Parker Team

The following information was taken from the Northern Kentucky Multiple Listing Service (MLS) on August 9, 2011.  It reflects the residential properties in the MLS.  This includes residential homes, condominiums and town-homes.  All information is as of January 1, 2011.

  Active Listings Listings Under Contract Sold Listings
# Properties 3882 677 2438

 

 

 

Approximately the average number of homes sold per month so far in 2011 has been 348.  This makes an 11.16 month supply of residential property in Northern Kentucky.

Out of those 3882 active listings, there are 190 active foreclosed properties for sale that are foreclosures.  That is 5% of our residential inventory in the MLS.  Year to date, 587 foreclosed properties have sold.  That's approximatly 24% of our sales since January 1, 2011.  This is about the same number as its been for the last two years.  Recieve your list of NKY Bank Owned Homes and foreclosed properties for sale in Northern Kentucky today. 

Inside the Northern Kentucky MLS there are 423 "NEW" homes for sale (New homes by builders).  259 "NEW" construction homes have sold since January 1, 2011.

Feel free to sign up to receive listings in the Northern Kentucky MLS delivered right to your inbox.  You can also sign up to receive Bank Owned Homes or a get a free market analysis of your home

"Like" us on Facebook for more reports like this as well as community information and exciting property listings.

The following information was brought to you by Mike Parker of HUFF Realty "Northern Kentucky's Real Estate Expert."  Contact him today today for all of your real estate needs.

Displaying blog entries 1-10 of 28

Syndication

Categories

Archives

Share This Page

Contact Information

Photo of Mike Parker - CRS Real Estate
Mike Parker - CRS
HUFF Realty
60 Cavalier Blvd.
Florence KY 41042
859-647-0700
859-486-3300