This can save you thousands of dollars but don’t tell anyone, it’s a secret…

Have you ever dared to look at the total amount of interest you’d pay if your mortgage went to a typical 30 year term?  Yikes!  Want a few simple ways to cut that interest down to size? Found this great article written by Barbara Bayer that I thought some of you might enjoy.

Send in extra money to pay down principal 

In the mid-1970s, Marc Eisenson coined the term “banker’s secret,” which promoted a cost-saving idea: Pay more than required on your monthly mortgage, and you’ll save a pile of money. Eisenson says, “It was a secret that bankers knew, but didn’t share with their customers.”

Here’s how it works. If you take out a $200,000 30-year mortgage at an interest rate of 6%, and hold it to term, you’ll pay a total of $382,537.97 for your home, including interest of $182,537.97. However, if you send in just $100 each month in additional principal, you’ll save more than $49,000 in interest over the term of the loan.

There’s another huge perk: You’ll pay off the loan five years and five months ahead of schedule. This strategy puts you in total control of the restructuring process, and there are no fees involved.

Another way to pay off your loan early is to use a bi-weekly payment plan. Banks and third-party companies can implement this plan for you, but they’ll charge hundreds or thousands of dollars in fees. We don’t recommend you pay for the service unless you lack the self-discipline to make the payments yourself.

With this strategy, you make half your monthly mortgage payment every two weeks, which equals 13 payments a year instead of 12. With bi-weekly payments on a 30-year $200,000 loan, you’ll save more than $49,000 in interest over the course of the loan, and pay it off approximately five years earlier.

Other ways to easily do it yourself:

  • Make one additional mortgage payment per year at any time.
  • Divide your monthly payment by 12, and add that extra amount each month when you pay your mortgage.

Recast mortgage for lower payments

If you want to lower your monthly payment and have at least $5,000 to contribute, you can request a mortgage recast. In this scenario, you don’t change the interest rate or term of your mortgage, you change the principal balance, and the term begins anew.

Here’s how it works: After 10 years of paying your 30-year mortgage with a 6% interest rate and a monthly payment of $1,432.86, your balance is $200,000. With a mortgage recast, you contribute an additional $20,000, and have a new principal amount of $180,000, with the same remaining 20 years to pay it off at 6%. However, your new monthly payment is $1,289.58, for a savings of $143.28 per month.

There’s a small fee for this service — approximately $250. The bank gets nothing out of this except retaining your loyalty, so they don’t promote it. It’s up to the lender whether it’ll do it, so all you can do is ask. It’s also likely to be a lengthy process. You have nothing to lose, however, except a higher monthly payment.

Refinance your loan

The most common way to restructure your loan is with a mortgage refinance, where you replace your current mortgage with a new one at a lower interest rate. If you took that same $200,000 balance on your 6% mortgage and refinanced into one with a 5% interest rate, you’d reduce your monthly payment from $1,199 to $1,074, saving $125 monthly.

Refinancing may be challenging to get approved for in a tight lending environment, where you need stellar credit scores and a steady job history. You’ll also need to pay closing costs, which can run 3% to 6% of the loan amount.

These tips are appropriate if you’re current on your mortgage and have extra money. Struggling home owners should consider the government-sponsored Home Affordable Modification Program (HAMP) for mortgage restructuring.

 

 

Advertisements

A strong work ethic and trustworthiness will set you apart…

I can’t tell you how exciting it is when I receive feedback from a client like this.  I am not only a proud broker but in this particular case a proud mom.  What a joy it is for me to have both of my daughters as licensed real estate agents working for Integrity Group.  I began my journey in real estate prior to having children and now am fortunate to have them both working by my side.
A client testimony ~   May 2012
“Kristina Cleaver was enthusiastic and helpful from start to finish, and ultimately due to her perseverance in searching, she found me the right home.
I would recommend her to anyone! She would serve the experienced home-buyer or investor just as well as the first time home-buyer. Mentored by a seasoned real estate agent with a wealth of experience, Kristina brings enthusiasm and persistance that is unique to her along with the resources and information of someone who has been in the industry for years. Another notable aspect, and perhaps the most important, is Kristina’s demonstrated level of trustworthiness. This is paramount in reducing stress and time for the buyer or seller, where certain items can be delegated to her that one may feel uncomfortable in leaving unguarded.
I strongly recommend Kristina to anyone dealing in real estate. Her strong work ethic, perseverance, pleasant personality, and trustworthiness set her apart in an excellent way.”
A. Chiles
For all of your real estate needs, call the agents you can trust at 208.890.8390   Visit our website here for more client testimonies.  Contact Kristina direct at 208.890.1204

Monopoly in real life…

With vacancy rates, mortgage interest rates, and property prices still low many people are considering starting their rental portfolio.  In order to start your rental property business, how do you finance your first home and get started?

If you can buy as an owner occupy and live in the property for 12 months you can get the best financing. Currently you can get a loan with as little as 3.5 percent with FHA financing and often times the seller may help with closing costs. After a year you can purchase your next property, live in it, and rent out the original. If you are thinking about your financial future and have time on your side this is an excellent way to get started.

If you want to buy a rental property without occupying, you will need 20 to 25 percent as a down payment for most loans and decent credit.  If you have cash or CD’s this may be a good time to convert your liquid assets into an investment property and increase your rate of return.

Now is a very good time to buy investment property. With some thoughtful planning and a little hard work you can increase your income stream and plan your future retirement.

For more information about purchasing and financing investment properties in the Boise, Eagle, Meridian, or surrounding Treasure Valley area contact me at this link or call me at 208.890.8390.  I’m always happy to assist with your real estate needs.