In September, the Federal Reserve raised interest rates for the third time in 2018 and they’re expected to go up one more time this year and three times next year. If you have a Home Equity Line of Credit, HELOC, you’re paying more to use that money and it is going to become more expensive.
It may make sense to refinance your home and consolidate the balance of your HELOC to lock in a lower mortgage rate. Most lenders require that the combination of these loans should not exceed 80% of the home’s fair market value and that you have good credit and adequate income to support the payment.
A HELOC is a first or second mortgage that allows the borrower to withdraw money as needed, up to the line of credit provided by the lender. A draw period is established where the borrower is only required to pay interest.
Since all HELOC loans are variable rate mortgages, during periods of rising rates, the cost of the funds increase. However, unlike adjustable rate mortgages that have specified adjustment periods and caps, a HELOC adjusts when the prime interest changes.
The formula for determining available funds on a refinance are to take 80% of the fair market value, which will probably have to be verified by appraisal, less the existing first mortgage and the costs to refinance. The balance would need to cover the cost of replacing the HELOC. Any remaining balance may be available for cash to be taken out.
Now is a great time for a mortgage review. In many cases, the equity you have in your home may allow you to eliminate mortgage insurance and substantially lower your monthly payment. As with all tax matters, always consult with a tax professional before making any decisions. Call us at (407) 212-2301 (Central Florida) or (954) 472-8102 (South Florida) for a recommendation of a trusted mortgage professional.
Something we keep hearing quite often is that people are afraid to buy a home because interest rates are high. If you look over time, however, you will see that interest rates are STILL at historic lows. In the past 30 years, interest rates were at times more than DOUBLE what they are today!
It is STILL a great time to buy a home!
Call us at 407-212-2301 to see how we can help you get started in your home search!
If you own a home but intend to sell it and buy another as part of your move, you may find yourself asking, “What should I do first – buy or sell?” It’s complicated to keep everything balanced in either situation, but there are advantages both to selling first, then buying or taking the opposite approach.
To help you decide which fits your situation best, you first have to determine the state of the real estate market you are selling in. But you will also have to seriously consider your finances, your comfort level in balancing transactions, your interest in moving once or multiple times and more. Keep reading to make this balancing act work for you.
Right now, while homes are selling quickly, it’s easier to purchase your new home first, since there are fewer homes on the market for buyers to choose from, so your home should sell faster. The main drawback is the possibility of getting caught in a transition market – it doesn’t take long for a seller’s market to cross the line. We can advise you as to the local real estate market in our area. Sometimes in a seller’s market, sellers would rather sell first, move into temporary housing, then take their time purchasing their next home. The sell first, buy later choice removes one stress of the transaction before the buying phase begins. It will also allow you the luxury of time to find the right house for your needs.
By selling first, you will also know exactly how much equity you’ll have that can be invested in your new home. If finances are tight, this might be the right choice for you.
However, don’t forget to plan for the numerous expenses of moving out of your home and into a temporary home (for an undetermined amount of time), then out of that temporary home and perhaps paying for storage of excess belongings along the way. These costs can add up, so consider this scenario with finances in mind.
Trying to sell in a buyer’s market may take some time. Ideally, you’ll sell before you close/settle on the purchase of your next home. If you commit to purchasing a home without having sold first, make sure you can afford a down payment, and perhaps double payments (including mortgage, insurance, maintenance, utilities, etc.) until the first home sells. You may also consult with a mortgage pro to determine whether a bridge loan might be the answer.
To protect your interests, consider using a Home of Choice (HOC) clause in the sales contract of your current home. The HOC clause allows you to make the contract contingent on finding a home to move into – within a specified time frame – before your current home goes to closing/settlement.
Contact us to find out what the best approach is for your situation if you are considering both selling and buying in today’s market. We are always available for advice! 352-973-2366.