When Should I Refinance?
Low-interest rates have many homeowners wondering if it’s a good time to refinance. Refinancing can save you a lot of money in the long term when done correctly. It’s important to consider the drawbacks as well. Here are some reasons why you might want to refinance, and a few things to be cautious of.
Reasons you may want to refinance:
1. To lower your monthly payment. If today’s interest rates are lower than when you purchased your home, refinancing to a lower rate will reduce your monthly payment down, freeing up cash to help with other bills, your children’s education, or to save towards retirement.
2. To pay off your mortgage earlier. A great way to use the money you save with a lower mortgage payment is to apply it right to your principle, which will help you pay your loan off earlier.
3. To take advantage of a better credit score. If your credit score has increased significantly since you bought your home, you may get a better loan if you refinance.
4. To save on total interest. For some, the desire to pay less interest overall makes refinancing an attractive option.
Reducing the interest rate and/or the loan term will save you money long term.
5. To change loan types. If you have an adjustable-rate mortgage that has been increasing or is nearing the end of the fixed period, you may want to switch to a fixed-rate mortgage.
If you have extra cash on hand to make larger monthly payments, it may make sense to change to a 15-year mortgage so you can pay it off earlier.
6. To consolidate debt or take cash out. If you have built up equity in your home, you may be able to borrow against your home to obtain cash to pay off higher-interest debt, to make improvements on your home, or for things like your children’s education or medical expenses.
Be careful when borrowing against your home. If the cash you take out goes to increasing your debt rather than resolving it, then you could end up putting your home in jeopardy.
Don’t forget about the closing costs involved in refinancing. You will have fees associated with your new loan just like you did when you purchased your home, so remember to figure the closing costs when you do the math.
Also, be cautious about extending your loan term. If you refinance with a 30-year mortgage when you are 10-15 years or more into your current mortgage, you’ll end up paying way more in interest overall, and have extended your payments for many more years.
Of course, a mortgage lender is the best resource for answering your financing questions. If you need someone to talk to further, I’m happy to give you a referral.
8 Reasons Why Real Estate is the Best Investment
Real estate has long been considered a solid investment for many reasons. It is a relatively safe and easy way for people to build wealth beginning with a small amount of money. If you are interested in investing in real estate, I’d be happy to help you find the right properties.
Here are some of the ways investing in property can help you build an investment portfolio.
1. Real estate investments can provide you with a reliable and steady cash flow. Investing in rental properties is relatively easy as expenses are predictable and if your properties remain occupied you know what to expect in terms of profit margin.
2. Real estate appreciates in value. Real estate consistently appreciates, even during economic downturns, making it one of the more reliable investments. On average, real estate in the US appreciates between 3-5% annually.
3. Real estate investments help you retire. If you have been paying on your mortgage throughout your working years, you will experience greater cash flow as you near the end of your mortgage term and the principal is paid off.
4. Real estate sales are taxed at a lower rate than other income. When you sell your property, you are taxed short- or long-term capital gains which are usually lower than income tax brackets.
5. Real estate equity can be leveraged. One of the most attractive reasons for investing in real estate is the ability to leverage your money. When you take out a mortgage to purchase property you reduce the amount of capital required. As you build up equity in the property, you borrow against the equity or refinance the original loan, freeing up cash to buy another property.
6. You have control to improve upon your asset. Unlike an investment in stock, where you have no control over how it performs, you can improve upon your real estate investment. Updating or upgrading systems, finishes, appliances, and landscaping helps build value in your investment.
7. Real estate gains taxes can be deferred. Under the 1031 exchange tax code, you can invest the gains from the sale in one property to the purchase of another property without paying taxes on the gains.
8. Real estate investments are depreciable. This is confusing, but you can legally claim a depreciation expense on an investment property even though the value of your investment property is actually appreciating. The depreciation deduction allows investors to generate a higher cash flow while reporting a lower income for tax purposes.
Ready to buy your first home in the Los Angeles in 2022?
Richard specializes in helping first-time home buyers like you find their dream property in West Hollywood. Before you start searching for homes online, it's important to take the first step to house shopping: Getting pre-approved for a mortgage.
Your pre-approval will tell you what you can afford and what your monthly payment will be, so it's important to determine this before you start searching for your new home.
Pre-approval is good for about 30-90 days, so once you're ready, take these first 3 steps to get it done.
Contact me, and I’ll send over a list of lenders I know and trust.
Look over the list, check out online reviews, and ask friends and family for referrals.
Email 2-3 lenders you like or let me introduce you over email.
Once you've got your pre-approval letter in hand, it's time to start the search!
Before we hop into the home search, I like to advise my clients to create a "Needs" list and a "Wants" list. This will help us to really focus on the things that are most important in your future home.
Needs are the non-negotiable features; the features you simply must have in your next home. Wants are the ones you’d like to have, but you can add or change down the road. Remember, you can’t change the lot or the location so make sure you love both.
Once you've established what you're looking for, I will set you up on a search so you can receive an email the second a home that fits your criteria goes live.
If you have any questions about a property, send me the information and I will find out for you. Send me listings you like and I can get more information and set up showings on your behalf.
After touring houses and choosing the one you love, it's time to make an offer.
To do this, you'll need your pre-approval letter or proof of funds. You'll also need to make an escrow deposit of at least 1-2% of the purchase price. This will go towards your closing costs at closing.
Have more questions about buying a home or what happens after making an offer? Reach out to me today!