Talking Real-Estate with Hope Leitner

 

November 2021

This newsletter is focused on financing. Whether you're trying to buy or if you are looking to save money, there are things to consider when it comes to real estate financing. Read more below. 

If you have questions, or if you need me to refer you to an excellent loan officer, you can always give me a call. Click here to find out how to select a loan officer and key items to consider.  Learn more click here. 

I am here to support my clients, whatever their real estate needs might be.  When you’re ready to make your move to buy or sell, give me a call. As always, I am here for you, and I welcome any communication from you.

HOMEBUYERS, FINANCE

Compare Interest Rates and APRs

When you apply for a mortgage, you may not pay the advertised rate. The best rates are for those homebuyers with the best credit scores. However, lenders are competitive, so you’d be wise to apply to several lenders at once. You’ll receive a loan estimate that you can compare side-by-side.

First, compare the interest rates. According to Nerdwallet.com, there are many factors that affect interest rates, from the economy to inflation, to the Federal Reserve’s overnight borrowing rates to banks. You can’t do much about that, but you can influence the factors that lenders look for.

If you have a credit score of 740 or higher, the risk of default is low enough that you will receive the lender’s best rate. A credit score of 620 or lower will give you fewer loan options and the highest rates. Lenders also look for the loan-to-value - code for how much money you’ll put down as a down payment. The more you put down the better the ratio.

The true rate you’ll pay is the annual percentage rate (APR). The APR is your mortgage interest rate plus other costs that have been rolled into the loan, such as points, fees, and other charges. You’ll be able to find that number under the “comparisons” section of your loan estimates.

Make sure that you’re comparing loans that the APR is consistent. For example, if the average 30-year fixed mortgage rate is 3.030%, then the APR is 3.250%.

FINANCE, HOMEOWNERS

Should You Refinance to 15 Years?

If you’re thinking of refinancing your mortgage, you’ll pay origination fees and closing costs, but it may be worth it to you to get a better interest rate and better terms.

Refinancing to a 15-year loan may mean you pay a little more for your refinanced mortgage, but the amortization schedule (how much goes toward interest and how much goes to reducing your principal) is definitely more favorable than a 30-year.

According to Bankrate.com, the average closing costs for a mortgage refinance are about $5,000. Costs will vary according to the size of your loan and the state and county where you live. But you can expect to pay anywhere from 2% to five percent of the borrowed amount. Closing costs can be rolled into the financing, so you don’t have out-of-pocket expenses, but that will add to the principal that needs to be repaid. For a $200,000 refinance, your closing costs range between $4,000 and $10,000, but you’d save much more than that in interest.

Could you simply make higher payments on your current loan? Yes, any amount you add onto your mortgage payment will reduce principal immediately but it won’t impact your interest rate until you refinance or pay the mortgage off.

TheSimpleDollar.com says it could be easier or cheaper to refinance to a 15-year mortgage. You’ll get a better interest rate because shorter terms lower risks for the lender and you could change the type of loan based on fixed, adjustable or hybrid rates.