New Second Home Rental Rules

Wednesday, May 1st, 2019

Second-home mortgage closings just got less stressful for borrowers. On April 3, Fannie Mae updated a document called the “Second-Home Rider.” The previous version of the rider, in force since 2001, was interpreted by many lenders and homeowners as completely prohibiting second-home owners in mortgages backed by Fannie Mae or Freddie Mac from renting out the property. The rider’s new language now explicitly allows homeowners to rent a second home after one year of ownership, and it allows short-term renting in the first year under certain conditions. According to the Wall Street Journal, a Fannie Mae spokesman said the new […]

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No Fooling, 4% 30 Year Mortgages Are Back!

Tuesday, April 2nd, 2019

Mortgage rates reached 4% last week, a rate low enough that economists and lenders believe it will help jump-start the housing market again according to The Wall Street Journal (WSJ). Just a few months ago, average rates were on the verge of hitting 5%, drying up refinancing activity and putting a damper on home price growth. While the housing market remains cooler than it had been at its peak, lower mortgage rates are again raising hopes for a rebound as the spring selling season gets under way. Mortgage rates have been declining along with the yield on the benchmark 10-year […]

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Recast Your Mortgage to Reduce Payments

Friday, March 1st, 2019

A ‘recast’ refers to a borrower who makes an additional principal payment and then asks the lender to re-amortize the loan at the existing interest rate. The result is that while the loan term remains the same, monthly payments are reduced. Not all lenders offer mortgage recasts on their loans. Recasts aren’t well known for a few reasons. Record-low interest rates in recent years made refinancing the go-to approach for borrowers looking to save on monthly payments. Also, lenders make little or no money when recasting—the lenders that allow it usually charge a $250 fee at most. As interest rates […]

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Time to Revisit Reverse Mortgages

Friday, February 1st, 2019

It’s time to let reverse mortgages out of the doghouse. This loan option got a lot of negative publicity in the past — but many of those issues have been addressed. Today, for the right borrower — a senior homeowner who wants to age in place, for example — reverse mortgages can be useful. We live in a world where people don’t have pensions anymore, and the cost of home health care is really expensive. The reality is that reverse mortgages are something that can work for a small percentage of people who fully understand what they’re getting into — […]

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Cash Out Refis Reach A Record

Wednesday, January 2nd, 2019

Rising mortgage rates are crushing much of the refinancing market. But Americans are still using refis to pull cash out of their homes. More than 80% of borrowers who refinanced in the third quarter chose the “cash out” option, withdrawing $14.6 billion in equity out of their homes, according to government-sponsored mortgage corporation Freddie Mac . That is the highest share of cash-out refis since 2007. The trend attests to the current state of the U.S. economy, which is more than nine years into an expansion that has lifted home values sharply but raised worker pay at a much slower […]

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Navigating the ‘1031’ Tax Break

Monday, December 3rd, 2018

The tax overhaul enacted last year made a lot of changes, but one provision cherished by real-estate investors survived: so-called 1031 exchanges. It’s the name for a tax break that lets you defer capital-gains taxes on the sale of a property used for business or investment if you reinvest the proceeds in another business or investment property. Individual investors—even those who own a single rental-income property—can take advantage of it. The “1031” name refers to section 1031 of the U.S. tax code. One typical way small investors use the provision is by selling one rental property and buying another. An […]

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Should Retirees Pay Off Their Mortgages?

Thursday, November 1st, 2018

Many homeowners dream of hosting a “mortgage-burning” party as they approach retirement. But paying off the mortgage isn’t always the best strategy. Sometimes, it’s better to keep that money in the bank for other purposes, such as building retirement savings or paying down higher-interest debt. In other cases, paying off a mortgage makes sense, especially when you have ample retirement savings and plan to stay in the home for a while. The analysis depends on the terms of your mortgage, the amount of your savings, and your expected retirement income. An increasing number of Americans are facing decisions about what […]

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Housing Has Tough Times On the Way

Monday, October 1st, 2018

The slowdown in housing can be blamed on a number of factors, and the bad news is they are all likely to get worse. The Commerce Department reported last month that single-family housing starts are below the levels they registered in the spring. Single-family permits, which measure how much construction is in the pipeline, fell to their lowest level in a year. Other housing measures, including existing and new home sales, have also been slowing in recent months. The reasons for the weakness are clear. Mortgage rates are near seven-year highs and rising prices are cutting into affordability. A tight […]

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The High Cost of Buying and Selling a Home

Tuesday, September 4th, 2018

Any homeowner knows that it costs a lot to buy and sell a home, but the magnitude of these costs may be underappreciated. A working paper by economist Charles Jones found that for someone owning a home for four years or less, the cost of buying and selling the home were higher than for all other costs—including interest payments, property taxes and insurance expenses. Even after owning the home for a decade, the costs of buying and selling a home make up about one-fifth the total cost. The problem with housing transaction costs is that they interfere with markets. To […]

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Sealing the Deal with a ‘Bump’

Wednesday, August 1st, 2018

What to do when a home-seller gets an offer but holds out hope for something better?  Enter the bump clause. A bump clause lets sellers enter into a contract with a buyer while still continuing to market the property.  If the sellers get a better deal, they can “bump” the original buyer. It’s most commonly used when a buyer’s offer has some contingency, usually that they need to sell their current home first.  It can help coax the sellers into contract by offering them the ability to seek alternate buyers who don’t have a home-sale contingency or who are offering […]

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