Home Purchase
Getting a mortgage loan for purchasing a property, whether it is an existing or a brand-new property, should not be an intimidated process. A well understanding and planning can help to achieve your goals at ease. We will help you every step of the way from obtaining a genuine mortgage pre-approval to closing your loan on time. We can get started with a conversation!
Refinance
When it comes to refinancing your current mortgage, it can be a simple process whether a rate-and-term reduction, or a cash-out. Strategizing to maximize the options for your short-term goals, and long-term goals is important as well, so you can save the monthly payment, closing costs, and invest your money prudently.
Rate & Term Refinance
Rate and term refinance is basically to replace the existing mortgage with a new mortgage with better rate and term. Generally, the new loan amount can be slightly higher than the existing mortgage to cover the closing costs, prepaid items, and a small cash out.
These following are typically acceptable for a rate and term refinance:
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Modifying the interest rate and/or term of the existing mortgage.
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Paying off the existing first mortgage.
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Paying off a subordination lien used to purchase the subject property.
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Paying off the PACE loans, and other debt used for energy-related improvements.
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Buying out a co-owner pursuant to an agreement.
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Receiving cash back with the lesser of $2,000.00 or 2% of the new loan amount.
However, these following conditions will be ineligible for a rate and term refinance:
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There is no outstanding first lien on the subject property.
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Paying off a subordination lien that was not used to purchase the subject property.
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Paying off the property taxes that are more than 60 days delinquent.
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The subject property is listed for sale at the time of closing the new mortgage loan.
Cash-out Refinance
Home equity is the actual property’s current market value less any liens that are attached to that property. It is an asset that homeowners can borrow against to meet important financial needs such as paying off high-cost debt. The interest rate on home equity-based borrowing is typically lower than that on credit cards and personal loans because the funds are secured by the equity. A cash-out refinance refers to using your equity to get a new mortgage that’s larger than the amount owed on your existing mortgage. Then, you pay off the existing mortgage and use the remaining money as needed.
These following are typically acceptable for a cash-out refinance:
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Paying off the unpaid principal balance of the existing first mortgage.
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Paying off any outstanding subordination mortgage liens of any age.
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Taking equity out that may be used for any purpose, such as debt consolidation, home improvements, etc.
Meanwhile, these following eligibility requirements must be met prior to the closing the new mortgage:
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if the property was listed for sale, it must be taken off the market.
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The property must have been purchased no less than six months. However, there are a few exceptions on this requirement such as the property was inherited, or legally awarded by court orders through the divorce, separation, or dissolution of domestic partnership.
HELOC (Home Equity Line of Credit)
A HELOC lets you access a portion of your home's value through a line of credit. It is a revolving line of credit, usually with an adjustable interest rate, which allows you to borrow up to a certain amount over a period of time. Much like a credit card, you draw on the credit line, pay it off and reuse it during the draw period, which is typically during the first 10 years. After the draw period, the repayment period begins, and you must pay off the outstanding principal and interest.
You can use a HELOC to pay for just about any things, such as home improvements, high-interest credit card debt, medical expenses, education costs, etc.
Benefits of a HELOC loan are:
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Lower interest rates than credit cards and personal loans.
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Flexibility to use equity from a HELOC however you want.
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Interest is charged only on the amount you draw, not on a lump sum.
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HELOC interest may be taxable if it is used to buy, build or improve your home.
Meanwhile, it also has disadvantages, such as:
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Variable interest rates that could increase over time.
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Some lenders require initial minimum drawdowns as a percentage of the total credit line.
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Reverse Mortgage
Reverse mortgage, also known as Home Equity Conversion Mortgage (HECM). It is insured by the U.S. Department of Housing and Urban Development (HUD). It is a type of mortgage allowing senior homeowners to access to their home’s equity to supplement their income. There is no monthly mortgage payment. Instead, the entire balance becomes due and payable when the borrower dies, moves out, sells the property, fails to maintain the property, or stops paying homeowner insurance premiums and property taxes. There are several ways to receive the proceeds from a reverse mortgage such as lump sum, fixed monthly payment, line of credit, or any combination of these methods. Meanwhile, the Federal mandates lenders to structure the loan so the balance will not exceed the home’s value even the market value drops, or the borrower lives longer than expected.
A reverse mortgage might work for seniors who:
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Do not want to make a monthly mortgage payment.
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Cannot afford for a monthly mortgage payment.
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Cannot qualify for home equity loan, or a cash-out refinance.
There are also a few requirements for a reverse mortgage:
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Borrower must be at least 62 years old.
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Subject property must be free and clear, or have a substantial amount of equity.
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Borrower must pay the closing costs including an up-front mortgage insurance, standard costs, mortgage insurance premiums, and interest.
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Borrower must complete a HUD-approved counseling session.
Whether a reserve mortgage is right for seniors, they need to ask themselves these few questions:
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How could a reserve mortgage affect their family? Think about if their spouse will be able to stay in the home after they die.
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How do they plan to stay in their home? If they stay in the home a short time, and the loan amount is small, then they should think about the costs and fees of a reverse mortgage involved.