Tag Archive for: lower payment

Seize the Moment: Why Waiting for the Fed to Drop Rates Could Cost You

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In the world of mortgages, timing is often seen as everything. Many homeowners are currently sitting on the sidelines, waiting for the Federal Reserve to lower interest rates before refinancing. But is this really the best strategy? Let’s explore why waiting for the Fed to act might mean missing out on significant benefits that refinancing can offer right now.

The Fed and Your Mortgage: It’s Complicated

First, it’s important to understand that while the Federal Reserve’s actions do influence mortgage rates, they don’t directly set them. Mortgage rates are more closely tied to long-term bond yields, which can move independently of the Fed’s decisions. Waiting for the Fed to drop rates doesn’t guarantee lower mortgage rates, and here’s why that matters:

Why Refinancing Now Could Be Your Best Move

1. You’re Missing Out on Immediate Savings

Every month you wait is a month you’re not benefiting from potentially lower payments. Even if rates drop further in the future, you’ll have missed out on months or even years of savings. Remember, refinancing isn’t just about getting the lowest rate in history – it’s about improving your current financial situation.

2. Home Values are High Right Now

In many areas, home values have increased significantly. This means you likely have more equity in your home, which could allow you to:

  • Eliminate private mortgage insurance (PMI)
  • Qualify for better rates and terms
  • Access cash through a cash-out refinance

Waiting for rates to drop could mean missing out on leveraging your home’s current high value.

3. Debt Consolidation Opportunities are Available Now

If you have high-interest debts, refinancing now could allow you to consolidate these into your mortgage at a lower rate. The longer you wait, the more interest you’ll pay on these high-interest debts.

4. You Can Always Refinance Again

If you refinance now and rates do drop significantly in the future, you can always refinance again. By refinancing now, you start saving immediately and still leave the door open for future opportunities.

5. Shorter Terms Might Be More Accessible

With potentially more equity in your home, you might be able to refinance to a shorter term (like from a 30-year to a 15-year mortgage) without significantly increasing your monthly payment. This could save you tens of thousands in interest over the life of your loan.

6. Protection Against Potential Rate Increases

While everyone hopes rates will drop, there’s always the possibility they could rise. By refinancing now, you protect yourself against potential future rate hikes.

7. Improved Loan Terms

Refinancing isn’t just about the interest rate. You might be able to remove a co-signer, switch from an adjustable-rate to a fixed-rate mortgage, or negotiate better terms. These benefits are available now, regardless of future Fed actions.

The Cost of Waiting

While waiting for rates to drop might seem prudent, it comes with hidden costs:

  • Continued higher monthly payments
  • Missed opportunities to eliminate PMI
  • Accruing interest on high-interest debts that could be consolidated
  • Lost time building equity (if refinancing to a shorter term)

Your Financial Future Starts Today

Remember, the best time to refinance is when it makes financial sense for your unique situation. Don’t let the pursuit of a “perfect” rate prevent you from improving your financial health today.

By refinancing now, you’re not just changing your mortgage – you’re opening doors to better financial wellbeing. You’re freeing up cash flow, potentially building equity faster, and taking control of your largest debt.

Take Action Now

Ready to explore how refinancing could benefit you today? Reach out to us so we can help you understand your options. We can show you exactly how much you could save by refinancing now, versus the potential costs of waiting.

For more info, please contact me below or go here, to complete a short refi questionnaire.

Best Regards,

101 Loan
Senior Mortgage Advisor
www.101Loan.com  hello@101loan.com
650-465-8957 c
CA DRE #01205444  NMLS #326829
101 Loan – 14435 C Big Basin Way, Saratoga, CA 95070

Products/Services/Accolades:

  1. Residential Financing for Purchases and Refinances on 1 to 4 unit properties.
  2. Reverse Mortgage Financing to include Conforming, Jumbo, HELOC Jumbo’s.
  3. Commercial & SBA Financing to include Multifamily, Office, Retail and Light Industrial.
  4. Access to over 60 banks with over 300 “Five Star” Reviews on Yelp, Google and Linkedin.
  5. Over 30 years of lending experience with over $2b in closed loan volume.

Note: Interest rates and loan programs quoted are subject to change without notice or until locked and approved by lender.

Want a Lower Payment and a Lower Rate Below Market…A 2-1 Buydown May be the Trick!

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Want a Lower Payment and a Lower Rate Below Market…A 2-1 Buydown May be the Trick!…(Read Below for More Info)

 

What is a 2-1 Buydown?

A Buydown temporarily reduces the mortgage payment for the borrower. This happens because the seller offers a credit that pays the difference between the full P&I payment and the reduced P&I payment. The seller only needs to provide the credit and the lender handles supplementing the payment. So, it’s a seller credit used in a different way!

Why would a seller want to give this credit to the buyer?

A Buydown is paid for by the seller instead of the traditional lowering of the sales price when a listing doesn’t sell.  This potentially attracts more buyers because they get a much lower rate and payment for the first 2 years.  It also provides a lower payment helps buyers ease into their new home given all the new expenses they may have.  It also allows them to refinance when rates drop.

This also allows the seller to maybe not have to lower the list price.  This keeps home values as high as possible!  Since this is also a cost to sell the property then the sellers potentially get a tax break by lowering any capital gains (of course sellers should always contact their tax advisor on this).

You can also have a situation where the list price is fine and the sellers don’t need to lower it or give a credit to the buyers.  So then the buyers can counter to increase the sales price to cover the buydown subsidy and then have the sellers give that buydown subsidy!  Sellers get the same net sales price and of course the buyers are getting a much lower payment on their first 2 years!  Of course to do this the property has to appraise for the higher purchase price.  The buyers have to have the extra couple thousand for the down payment because of the slightly higher purchase price in order for this scenario to work.

Basically this is the borrower “financing” their buydown with the higher purchase price in order to get the seller to give the credit to fund the buydown!

Here Is an Example for Educational Purposes Only:

Interest Rate is 6.50%       Loan Amount is $715,000

P&I at $715,000 with a rate of 6.50% is equal to $4519.29/month

If a Seller credits the buyer with a subsidy, this amount can be applied to the buydown and reduce the 1st, 2nd or 3rd year payment, depending on the subsidy amount.

Let’s say a seller agrees to supplement the payment difference for years one and two.

The first-year payment for the borrower would be a rate of 4.50%.  The second-year payment for the borrower would be a rate of 5.50%.  Years 3-30 would be the normal rate of 6.50%.

Year One@ 4.50% = $3622.80 – P&I/Month

Year Two@ 5.50% = $4059.69 – P&I/Month

  • Keep in mind that the borrower still has to qualify at the NOTE RATE and not the buydown rate so in this scenario the borrower qualifies at the note rate of 6.50%
  • In this scenario with the 1st year rate being 4.50% and the 2nd year rate at 5.50% then this means their average rate for the first 2 years is at 5.00% which is still 1.50% LOWER than the current market rate!!

Seller Subsidy:

The difference between the Normal Payment of $4519.29 and Yr. One of $3622.80 is $896.49/Month.

The difference between the Normal Payment of $4519.29 and Yr. Two of $4059.69 is $459.60/Month.

If the Seller offers a subsidy of $896.49 x 12 = $10,757.88 (for 1st year) plus $459.60 x 12 = $5515.20 (for 2nd year) they would offer the borrower a total subsidy of $16,273.08 which would pay for the payment difference the first two years.

This strategy helps a homebuyer ease into their house payment and frees up funds for other things that would have normally gone to a house payment. NOTE: Seller credit cannot exceed maximum seller contribution for program selected.

 

For More Info, please contact me.

Best Regards,

101 Loan

Senior Mortgage Advisor

www.101Loan.com

408-377-4123 o  650-465-8957 c   408-608-1921 f

101 Loan – 14435 C Big Basin Way, Saratoga, CA 95070

101 Loan LLC – CA DRE #01205444  NMLS #326829

Products/Services/Accolades:

  1. Residential Financing for Purchases and Refinances on 1 to 4 unit properties.
  2. Reverse Mortgage Financing to include Conforming, Jumbo, HELOC Jumbo’s.
  3. Commercial & SBA Financing to include Multifamily, Office, Retail and Light Industrial.
  4. Access to over 50 banks with over 200 “Five Star” Reviews on Yelp, Google, Facebook and Linkedin.

Note: Interest rates and loan programs quoted are subject to change without notice or until locked and approved by lender.