We may not be comparing real apples and oranges, but we’re coming pretty close in the home financing industry. And if you’re at all interested in using your home’s equity to access cash, then this comparison is for you.
As we discussed in our last email, there are two common ways to get cash from your home—a Home Equity Line of Credit (HELOC) or a cash-out refinance.
In the current environment, many people want to keep the great interest rate they already have on their home loan, so they automatically choose a HELOC over a refinance. But wait—there’s a big difference that can make the benefits hard to compare at a glance. HELOCs have adjustable interest rates, whereas most home loans are fixed.
Take a look.
If you’re interested in exploring your options more or you have questions about home financing, please reach out. I’ll be happy to help.
Good news! When it comes to documenting income, self-employed borrowers can get back to normal.
What does this mean?
Borrowers who rely on self-employment income may now submit their most recent tax returns, so long as they are no earlier than 2020, in typical scenarios.
How does this help?
Under previous Covid-era rules for certain government-backed loans, self-employed borrowers had to submit recent P&L statements, asset account statements and more. It’s much easier for most to supply tax returns instead.
We may not be comparing real apples and oranges, but we’re coming pretty close in the home financing industry.
And if you’re at all interested in using your home’s equity to access cash, then this comparison is for you.
There are two common ways to get cash from your home—a Home Equity Line of Credit (HELOC) or a cash out refinance.In the current environment, many people want to keep the great interest rate they already have on their home loan, so they automatically choose a HELOC over a refinance. But wait—there’s a big difference that can make the benefits hard to compare at a glance. HELOCs have adjustable interest rates, whereas most home loans are fixed.
Try it out. And if you’re interested in exploring your options more, please let me know. I’ll be happy to help.
A good credit score is important for more reasons than just obtaining new credit. These days, it can factor into everything from landing a new job to getting the best deal on your insurance policies. It's more important than ever to avoid late payments on your mortgage!
A 100 point drop for one late mortgage payment? It’s true. A single 30-day-late mortgage payment can cause your score to drop by as much as a hundred points. Credit scoring algorithms vary based on many factors, and in some instances, the damage may be even greater and last for years.
The costs accumulate. At the time, a single missed payment will cost you only a late fee, but the expense really adds up on your next loan or missed opportunity. Low credit scores typically mean a higher rate and cost. Higher rates can mean hundreds or thousands of dollars of extra expense over the life of a loan.
Missed payments are usually unplanned. Usually, events beyond our control lead to late payments, such as an accident, illness, job loss or family issue. At other times, carelessness or a hectic life may result in a forgotten payment.
What can you do?
Little other than time will decrease the negative impact of a late payment, so prevention is the one sure remedy. If you don't already have a good system in place to assure timely payments and are not sure what's best, reach out anytime. We'll be happy to help set up a plan that's right for you.
Let’s talk about another common purpose for HELOCs—consolidating debts. A cash-out refi is also often used for this purpose.
With the HELOC, you add an additional loan to your current mortgage. With the cash-out refi, you will still have only one loan. Depending on how much you owe on your current loan and how much cash you borrow against your home’s equity, the total amount may be more or less than what you currently owe.
Even in times when mortgage rates are not at their lowest, home loans can still be an amazing bargain compared to consumer and installment rates. A HELOC or cash-out refi can help you pay off debts faster and reduce both the the total interest and total amount of cash out of pocket you spend each month.
Consolidating multiple debts into a HELOC or one home loan is not for everyone. For instance, using your equity to have the equivalent of a 30-year car loan is rarely a great idea. But it may work if you have the discipline to take advantage of a low rate to speed up—rather than slow down—payment terms. In other words, use the low rate of a HELOC but pay the amount used for the car back in the same 4 years or so that you would have with a typical auto loan.
Consolidation can make debts disappear with less total interest expense than they would otherwise.
Want to explore what a good consolidation plan could mean for you? Reach out, and we'll be happy to help!
This Refinance Calculator offers a quick way to see what a refinance could mean for you. Simply plug in the numbers for your current and desired loans, and we’ll calculate the difference in your payments. You may be surprised at the big difference even a small interest rate change can make.
Refinancing isn’t just about monthly savings. A lower rate can help you pay your loan off faster or possibly allow you to access cash from your home’s equity with no change in payment at all. There are many options to pursue.
Today’s rates
New Home Purchase
Conforming Interest rate
30-yr fixed 3.250%
Rates are not static, they often change throughout the day.
If another lender offers a lower rate, there's a buy-down involved.
Often not mentioned when quoting the lower rate
Actual rates vary based on Loan Amount, Middle Credit Score, DTI, Term
Today’s rates based on a purchase 760 middle score, conforming loan, detached, primary residence, non-self-employed, detached, primary home
30-yr fixed 3.20%
30-yr fixed 3.200%-3.250%
Interest rates can be volatile. That can mean either risk or, sometimes, reward.How much?I’m glad you asked. Click below for an easy way to find out.Not ready to take action today? Think rates will come down soon?Remember these truths:
Are you ready to end the wait? Please reach out. I’ll be happy to help.
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