Why Now Is the Perfect Time to Buy a New Home

If you’ve been waiting for the best time purchase your next home, the time is now. Here are my top three reasons to buy a Newtown home today.

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If you’re considering purchasing a home, there may not be a better time than right now to do so. There are three primary reasons why:

1. Interest rates are still at all-time lows. This has a major impact on not only your potential monthly payment but your overall home cost as well. While many home buyers think about the cost of owning a home based solely on the total purchase price, they forget to account for the cost of the monthly payments as well.

2. Home prices are very affordable. We have seen home values rise a bit since the recession, but for the most part, home prices are still reasonable by most metrics.

3. Home values are increasing. If you were to buy a home today, there is a good chance that you’d see a fair amount of appreciation in value throughout the coming years. Because so few homes were built during the recession, supply is still low. This means that even if demand stays roughly the same, the fact of the matter is that there is just not enough supply on the market to meet that demand. As a result, the houses that are available should increase in price and allow buyers to build equity quickly. 

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A small increase in interest rates could cost you $40,000 on your home purchase.

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As you can see, there are a number of factors that make now a great time to buy a home in the Newtown area, but let’s take a look at how much waiting to buy a home might cost you.

Right now, we’re seeing about 5% appreciation in home prices, and it would not be unreasonable to see a .25% to .5% increase in interest rates over the next 12 months. This slight bump would still leave interest rates relatively low. However, that 5% appreciation and a small bump in interest rates could potentially add $40,000 in additional costs to the cost of a median-priced home in Newtown over the lifetime of a loan. This equates to $125 added to your monthly payment every single month for up to 30 years!

I don’t like to create a false sense of urgency when talking to anybody who is looking to buy a home because I realize that everybody’s individual timing is very personal. However, in this case, the combination of affordable home prices and low interest rates makes right now an ideal time for many people to purchase a home, and may even mean a significant difference in the overall cost of owning that home.

If you’ve been considering purchasing a home and would like any more information on our current Newtown market or what’s involved in a home purchase transaction, please don’t hesitate to give me a call or send me an email. I’d be happy to help you!

Why Everybody is Refinancing Their Mortgages

There’s a lot of mortgage refinance activity right now, and for good reason. Refinancing can help you meet your financial goals in more ways than you’d think.

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Does it make financial sense to refinance your existing mortgage right now? There has been a significant uptick in refinancing activity over the last 30 to 60 days, and this is due to a number of factors:

To begin with, interest rates have fallen even further. They’re sitting very close to their all-time lows across the country, and many homeowners are looking to take advantage of this by refinancing their current mortgages.

Also, home values in our area have been appreciating quickly. Why does this matter?

If you have an FHA loan on your home or put less than 20% down on it, chances are that you have mortgage insurance. Mortgage insurance is that pesky extra amount of money on your monthly statement that serves no purpose other than to protect the banks because you didn’t have enough equity built up in your property at the time of purchase.

Higher home values mean that refinancing now could not only bring down your interest rate but also could eliminate or reduce your mortgage insurance as well. 

Another refinancing option is a rate reduction, in which you would keep your mortgage terms the same. This would be great for anyone who needs improved cash flow for things like paying off extra credit card debt or sending a child to college for example.

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There are a lot of ways to refinance right now, regardless of your situation.

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While some people are afraid of refinancing their mortgage back into a 30-year loan, what they don’t realize is that these changes can be temporary – until that credit card debt is paid off or the child has graduated college – and those savings can then be put back into the mortgage to reduce it to as short or even shorter than the time remaining prior to the refinance.

You can always put extra money back into your mortgage in order to pay it off quicker.

In addition, homeowners can also take advantage of term reduction. Term reduction means lowering the interest rate on your mortgage and using those savings to pay your mortgage off quicker.

As an example, I just helped a client refinance their mortgage from a 27-year loan into a 20-year loan, and it will only increase their payment by $50 per month; this will save them about $150,000 in interest.

In short, there are a lot of different opportunities for people in many different situations to use a refinance to meet their financial goals. If you have any specific questions on how refinancing can help you meet your goals, give me a call or send me an email. I’d be happy to help you!

How to Use a Second Mortgage in a Home Purchase

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Sometimes, getting a second mortgage can be a proactive step in making your new home purchase easier and less costly. We’re not talking about a second mortgage where you use a line of credit to pay off debt. We’re talking about using it as a piggyback mortgage to purchase a home. Why would you want to have two mortgages at once? There are a few particular situations where it makes perfect sense.

One thing you run into when buying a home is mortgage insurance. If you don’t put at least 20% down, you are going to have to pay it. Depending on a number of factors, it can get quite expensive. Most people don’t want to pay mortgage insurance, but many people can’t afford to put 20% down on a home either.

The other reason for getting a piggyback mortgage is because of loan limits. The majority of the country, with the exception of a few extremely high priced markets, has a $417,000 loan limit. If you wanted to borrow more than that, you would have to get what’s called a “jumbo mortgage.” These typically have higher interest rates than regular mortgages and often times have more red tape involved.

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Each situation is different.

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Using a second mortgage in conjunction with your first mortgage can accomplish a few different things. First, it helps you avoid a cumbersome loan process while getting a better-blended interest rate (the average of the two interest rates). This blended rate is often better than a jumbo mortgage rate would have been.

Another way you can use a jumbo mortgage is if you don’t have 20% to put down on the home, but you still want to avoid paying mortgage insurance. You can get one mortgage for 75% to 80% of the home’s value, then get a second mortgage for 10% to 15% of the home’s value. You could end up borrowing 85% to 90% of the home’s value without having to pay mortgage insurance.

There are all kinds of options, and each situation is a little different. Sometimes, it makes more sense to do a jumbo loan or pay mortgage insurance than it does to get two mortgages at once. That is why you need to partner with a professional who can give you the recommendations and the advice so you can be certain you are structuring your loan in the way that is right for you.

If you have any questions for me or my team, give us a call or send us an email. We look forward to hearing from you.