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Thursday, November 29, 2012

Refinancing: Does a New Mortgage Make Sense? 6 Do's and Don'ts


I'm not a mortgage broker or banker, but refinancing can be a great way to save money and help you more quickly get rid of a mortgage with less favorable terms . And with interest rates near historical lows, you may be wondering whether a new loan makes sense for you.

Perhaps, but keep in mind that not all refinance offers are worth the trouble or the expense. Before making a decision, take a look at my following six do's and don'ts.

1. Do Pull Your Own Credit Report and Score

Start out by pulling your credit reports so that you know exactly what a prospective lender will see. You don't want any nasty surprises, like having someone else's late payment showing up on your report by mistake or other errors that may not belong to you.

Under federal law, you're entitled to one free copy per year of your report from each of the big-three credit bureaus: Equifax, Experian and TransUnion. You get it by visiting annualcreditreport.com.

The report won't include your FICO credit score, which is a summary of the information in your credit reports that represents your potential credit risk. It will cost you $19.95 online to get the FICO report.

From a bank's perspective, typically your credit score is a reflection of what kind of risk you are....The lower your risk, the higher your credit score will be. And the higher your score, the lower your mortgage rate will be. See?

2. Do Shop Around for the Best Rates and Lowest Overall Fees

In recent months, mortgage interest rates have fallen well below 4 percent for many, their lowest levels since the 1950s. But not everyone qualifies for the super-low rates. They're normally granted only to people who have excellent credit and at least 20 percent equity in their homes.

So pick up the phone and start dialing lenders -- however, if you contact me, I'll refer you to the best mortgage lenders. Have your credit score in hand, the person at the end of the call will want to know. You can also shop online at mortgage comparison sites like HSH.com or bankrate.com, which will do the rate hunting for you just to get going.

Just understand that rates change on a day-to-day basis.

I suggest asking about other refinancing expenses such as loan origination points, loan discount points and lender fees such as underwriting, processing and application fees. And, the big "and", your re- finance expenses can usually be rolled into your new loan so there is no cash outlay from you.

Don't focus just on the interest rate. Instead, look at the overall APR or annual percentage rate on a loan, that way, you'll be able to make a true, apples-to-apples comparison of the overall cost of credit.

Most large banks are charging lender fees ranging from about $1,200 to $1,700 for each mortgage closed.

3. Do Use Caution When Taking Cash Out - Better Yet, Do Not Cash Any Funds Out

Some people use mortgage refinancing as a way of retiring higher interest debt, such as credit card balances you borrow extra for that. While eliminating that kind of debt is a good strategy, you don't want to do a "cash out" refinance deal only to run out and charge up the credit card. The risk is that you'll end up both with big credit card balances and with a larger mortgage note that may become unaffordable.

4. Don't Let Low Rates or Teaser Rates Get You Into Trouble

It's easy to want to trade in your current mortgage for a new one when it seems like everyone else has a lower rate than you or when banks are offering "teaser" rates, like adjustable rate mortgages that start off low and then reset upward.

You may have family members, friends or your local, friendly banker telling you to follow the old, conventional wisdom that you should refinance whenever rates fall by at least 1 percent. Be careful as this may not be the best advice you can get.

But getting a new mortgage doesn't always make economic sense.

No matter what somebody's telling you, you need to run the numbers and see if a refinance is wise financially. For people who've had their mortgages for 15 years or so, and they've already locked in a low rate, refinancing may not be worth your while.

That's easy to figure out, what you pay now, and what you will be paying when refinanced in the same number of years of your mortgage amortization period left in your existing mortgage - the number of years left in your existing mortgage, including the closing costs.

Here's a no- brainier - you have 20 years + left on your current conventional mortgage with a 6.5% rate and a balance of $250,000 + and your credit score is 720+.  Your monthly savings could easily be $500/month.

And just as you should always read the terms and conditions of any credit card offer, so should you read the fine print of a new mortgage.

5. Don't Extend the Term of Your Loan Unnecessarily

In my opinion, nobody over the age of 50 should be taking out a 30-year mortgage. Who would want to be paying a mortgage in their 80s? I'd say go for 15-year loan at the current low rates, especially if you have current great income.

So the strategy here folks is that instead of starting all over again with a new 30-year loan, opt for a loan with a shorter term so you can more aggressively eliminate housing debt. Right?

My advice, of course, won't apply to everyone. Sometimes older Americans are struggling to just pay their bills. So if you're refinancing because you need a lower payment and if it's a choice between defaulting on a current mortgage versus taking a mortgage with a longer term, then by all means take the longer mortgage.

6. Don't Accept Surprises at the Closing Table

In years past, it wasn't uncommon for borrowers to be hit with unexpected fees and rate changes when they proceeded to settlement on their loans. These days, that should not happen at all from competent mortgage lenders, thanks to recent federal laws protecting consumers in the mortgage market.

For starters, you can now get a special statement 72 hours before closing. Known as the HUD-1 form, it contains an accounting of all the costs tied to your mortgage. You should carefully review it and compare the lender fees and expenses listed on your HUD-1 to the GFE, or Good Faith Estimate, that your lender initially gave you.

You have specific rights. Anytime the rate on your APR changes by more than one-eighth of a percentage point, the law stipulates that a lender must re-disclose that to the consumer. And they have to re-disclose the loan at least three days prior to closing.

But if you don't catch something particularly as you're signing a slew of documents during closing you needn't worry. That's because mortgage borrowers have three days to change their minds.

If you close on a Monday, you have the next three days Tuesday, Wednesday and Thursday to rescind or cancel the transaction. So if you think something isn't how it should be, use those next few days to ask questions and investigate.

By the fifth day, Friday, the time will be up and you'll be the holder of a new mortgage.

But if you've followed my six steps, you should be able to pay it just fine.

Richard Bazinet - Phoenix Scottsdale Real Estate - Realty ONE Group

Monday, November 26, 2012

Complete MLS Access for Home Searches in Phoenix and Scottsdale

... and other areas of the Valley in Arizona.

Here's how to search for all the Phoenix Area homes for sale -- and rentals as well. Updated daily, this search tool gives you access to all the homes listed on the MLS system, FREE. You can use the simple version or the more advanced version for specific features. Once you have found what you like or want, you can also obtain all the details about each property including all the photos.

You can sort the results of your searches, and even refine your search until it is exactly what you are looking for. You can map the property, do a quick mortgage calculation, get a quick value estimation, information about the schools, the neighborhood, stores and restaurants, print a copy of the listing, AND even schedule a time and date to view the property by using the 'Contact' link at the top under the 'details' tab.

Go to www.wildwestrealestate.us and click on the "Click Here For MLS Property Search" logo.

All courtesy of Richard Bazinet, Realty ONE Group, Phoenix Scottsdale Real Estate.

Thursday, November 8, 2012

10 Things You Need to Know About the 3.8 Percent Tax and Real Estate


There has been a lot of chatter in the real estate industry about the 3.8% Tax to take effect on January 01, 2013 and how it affects real estate. And it appears that the chatter is replete with incorrect information. So here's a quick summary and an offer for more information bottom of the blog)

[disclaimer: I advise that you always consult a competent tax professional for an expert opinion on any investment or financial strategies. I'm a Realtor, I am not qualified and neither a tax or financial expert to provide you tax, financial or investment advice.]

1. If you add up all of your income from every possible source, and that total is less than $200,000 ($250,000 on a joint tax return), you will not be subject to this tax.

2. The 3.8 percent tax will never be collected as a transfer tax on real estate of any type, so you’ll never pay this tax at the time that you purchase a home or other investment property.

3. You’ll never pay this tax at settlement when you sell your home or investment property. Any capital gain you realize at settlement is just one component of that year’s gross income.

4. If you sell your principal residence, you will still receive the full benefit of the $250,000 (single tax return)/$500,000 (married filing joint tax return) exclusion on the sale of that home. If your capital gain is greater than these amounts, then you will include any gain above these amounts as income on your Form 1040 tax return. Even then, if your total income (including this taxable portion of gain on your residence) is less than the $200,000/$250,000 amounts, you will not pay this tax. If your total income is more than these amounts, a formula will protect some portion of your investment.

5. The tax applies to other types of investment income, not just real estate. If your income is more than the $200,000/$250,000 amount, then the tax formula will be applied to capital gains, interest income, dividend income and net rents (i.e., rents after expenses).

6. The tax goes into effect in 2013. If you have investment income in 2013, you won’t pay the 3.8 percent tax until you file your 2013 Form 1040 tax return in 2014. The 3.8 percent tax for any later year will be paid in the following calendar year when the tax returns are filed.

7. In any particular year, if you have no income from capital gains, rents, interest or dividends, you’ll never pay this tax, even if you have millions of dollars of other types of income.

8. The formula that determines the amount of 3.8 percent tax due will always protect $200,000 ($250,000 on a joint return) of your income from any burden of the 3.8 percent tax. For example, if you are single and have a total of $201,000 income, the 3.8 percent tax would never be imposed on more than $1,000.

9. It’s true that investment income from rents on an investment property could be subject to the 3.8 percent tax. But, the only rental income that would be included in your gross income and therefore possibly subject to the tax is net rental income: gross rents minus expenses like depreciation, interest, property tax, maintenance and utilities.

10. The tax was enacted along with the health care legislation in 2010. It was added to the package just hours before the final vote and without review. NAR strongly opposed the tax at the time, and remains hopeful that it will not go into effect. The tax will no doubt be debated during the upcoming tax reform debates in 2013.


So if you would like more information about this new tax legislation, please feel fee to contact me at your earliest convenience - Richard Bazinet - Realty ONE Group, by phone or by email to obtain your free informational e-brochure with example and scenarios to may be applicable to you.

You can also find my contact information or contact request form and market statistics at at www.wildwestrealestate.us