Category: Refinance

Mortgage refinance increase as rates affected by Brexit

More US homeowners are choosing to refinance, thanks to lower interest rates amid the Brexit vote. According to Mortgage News Daily, the Mortgage Bankers Association (MBA) Refinance Index fell back by 1 percent for the week ending July 15; however, the refinance share of mortgage applications continued to increase, rising 64.2 percent from 64.0 percent the week prior. Continue reading Mortgage refinance increase as rates affected by Brexit


Is it a good time to refinance?

Woman at home

Mortgage refinance applications have been increasing lately, leading many to consider if now is a favorable time to do so. With mortgage rates remaining near historic lows, and more homeowners regaining equity, it’s no real surprise that more Americans are considering a refinance – whether they want to switch from an adjustable rate to a fixed rate, or simply lower their rate altogether. Continue reading Is it a good time to refinance?


How to Get a Mortgage on a Co-op or Condo in New York

By Anya Martin March 12, 2015  1:30 a.m. ET

In New York City, key decisions often come in pairs: Yankees or Mets? LaGuardia or JFK? MoMA or the Met? In real estate, it comes down to this: condo or co-op?

Cooperative buildings, better known as co-ops, are abundant in New York’s five boroughs but are far less common in other cities. In a co-op building, buyers purchase a share of the entire property and co-own it with fellow residents. With a condo, the buyer purchases the real property.

The choice between a condo and a co-op also relates to lifestyle, says Michael Shapot, an associate broker with Keller Williams Realty NYC. “Somebody who likes an older building with character tends to pick a co-op apartment rather than a shiny new condo,” he says. “It’s a white gloves, old-world, live-in help sort of situation, whereas in the new condos, there’s a doorman [but the building has] a more international flavor.”

Lenders may tread more carefully when financing a condo, says John Walsh, CEO of Milford, Conn.-based Total Mortgage Services. If too

ILLUSTRATION: CHRIS GASH
ILLUSTRATION: CHRIS GASH

many units in the building are sitting empty, more than 10% of units are owned by a single investor or if a high percentage of homeowners are delinquent on association fees, a lender may turn down a mortgage.

Some lenders track these factors in condo and co-op buildings and keep an approved building list. A building that is on the approved list at the start of the mortgage-application process could be removed by closing, says Alan Rosenbaum, CEO of Manhattan-based GuardHill Financial. “It’s something totally out of control for a customer,” he says.

A lender may also feel more secure with co-op borrowers because they often have to undergo even more stringent financial vetting by the co-op board. “Joining a co-op is akin to joining a country club, and the club members who are voting on your membership want to know that you play in the same financial arenas they do,” Mr. Shapot says.

In contrast, condo buyers include many international buyers who pay cash because they don’t want a close inspection of their personal finances, and they want the flexibility to sublet the unit or use it as an occasional pied-à-terre, he adds.

Still, financing a co-op comes with quirks. Some buildings don’t permit a home loan at all, or the boards require reserves up to the amount of the purchase price, says Peter Grabel,managing director of Stamford, Conn.-based Luxury Mortgage. Other boards won’t let buyers finance more than 50% of the purchase price. “Many times the lender is willing to lend more than the board allows,” he says.

One loan-approval problem that was common a few years ago has almost disappeared for both New York condos and co-ops—appraisals not keeping up with rapidly rising home values, says Peter J. Goodman, a broker with Brooklyn-based VA Loan Captain Realty.

In metro New York, the average home price in the fourth quarter of 2014 was $841,000, according to the Real Estate Board of New York, a state trade association for real estate professionals. This average, which includes condos, co-ops and single-family homes, is 11% over the same period of 2013.

“The market has been heating up for a couple of years now, and it doesn’t feel like there’s a ceiling anytime soon,” Mr. Goodman says. He has seen a lot of financed and cash purchases in Brooklyn, including multiple cash offers, even in the $800,000 to $1.2 million range, he adds.

Those high prices usually mean that buyers who finance must choose a jumbo mortgage, a loan that exceeds the $625,500 limit of government-backed loans. (Loans over $417,000 are considered jumbos in less expensive areas of the country.)

A few more tips:

Lower closing costs for co-ops. New York condo buyers typically have to pay 1.8% of the purchase price in state mortgage tax. Because co-op borrowers buy a share of the property instead of the real property, they don’t pay this tax or title insurance.

Limit mortgage shopping. It’s the opposite of the usual advice to find the best mortgage rate and terms, but a contracted lender who has preapproved the building may provide faster financing and be reassuring to both buyer and seller, Mr. Goodman says.

Finance it yourself. Co-op or condo buyers may consider taking a margin loan against their stock portfolio to put toward a purchase, Mr. Shapot says. The move can be risky if the stock market falls precipitously and the brokerage demands immediate repayment. Still, because the money obtained in a margin loan is considered cash, the approach may help a buyer if a co-op board has financing limits or is in a competitive bidding situation, he adds.

Corrections & Amplifications. New York co-op borrowers pay a “mansion” tax for properties over $1 million. An article on condo and co-op financing in New York that appeared in Friday’s Mansion section incorrectly stated that co-op buyers don’t pay this tax.


What are the benefits of refinancing your loan?

By Brett Mosello January 2, 2015 9:40 a.m. ET

The process of refinancing a home mortgage can be almost as challenging as obtaining it the first time around. This leads many to avoid the process even when there are substantial benefits to doing so. In addition, the cost of refinancing runs between 3 and 6 percent of the loan amount, requiring that homeowners have a substantial up-front payment. However, once homeowners understand the actual amount of money that they will save over the life of their loan, they realize that refinancing is often the smartest financial move to make. Here are some of the benefits of refinancing and advice on when they make sense.

Lower Interest Rates

One of the main benefits of refinancing a home loan is to obtain a lower interest rate. A lower interest rate helps a home owner in several ways. First, it reduces the monthly payment because the interest portion is reduced. Secondly, more of the money is going toward the principle, so equity is built faster. When the up-front refinancing fees are taken into account, it typically makes sense to refinance when the interest rate is two percentage points lower than your current loan rate. However, in some cases it makes sense to refinance when it is only 1 percent lower, as you will see below.

Shorter Loan Terms

home-refinancing
Benefit from lowering your APR

Another benefit to refinancing is that is allows homeowners to reduce the number of years that they pay on the loan. This works by converting an existing loan to another loan at a slightly lower interest rate. When all is said and done, the homeowner’s monthly payment stays the same or increases only slightly, sometimes by less than $20 per month. However, they are able to shorten the life of the loan from say 30 years to only 15.

Change the Loan Type

Homeowners who were caught up in the lending frenzy before the housing collapse may still have loans that aren’t desirable, such as interest-only or adjustable-rate. These homeowners now realize that they haven’t made a dent in their principle or that their interest rates are sky rocketing. The answer is to refinance the old loan into a new conventional loan with a fixed interest rate.

Utilize Equity or Consolidate Debt

In some cases, refinancing to consolidate debt makes financial sense. For example, if a homeowner has a first and second mortgage, or a home equity line of credit, these can all be consolidated into a single low-interest loan. Similarly, homeowners can do a cash-out refinance where they receive a check for the current amount of equity they have in the home and use it to pay off debt or make needed repairs.

While these refinancing benefits can all result in substantial savings for home owners, there are other considerations, such as how long they plan to stay in the home. In general, it takes between two and five years for most homeowners to recoup the up-front costs of refinancing. Thus, for those who want to move sooner than that it may not make sense to refinance. However, for homeowners who are in it for the long haul, refinancing can reduce the long-term costs and time commitment for the home loan.

If you are wondering whether refinancing your home makes sense, contact Luxury Mortgage and let us discuss your refinancing options. We will help you sort through the confusion and pick the refinance loan that is right for you.