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Welcome
to Homefront News, a quarterly newsletter presented
by Bernie Saul, President, Equitylink Mortgage, Inc.
Archives
March,
2005
Inside
this Issue:
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The
System Works...
...but
only when we work the system! I am talking about
saving money, in any instrument. Without a doubt,
the only savings tool that works, is the one which
automatically deducts money from our account or
pay check. If we leave such contributions to the
whims of our discretion… it just won’t
happen! We need to make the commitment to pay
ourselves consistently, then implement an investment
instrument that we can put out of our mind. If
we are left to make a choice each month, as to
how much we will save/invest, what do you think
will be the outcome? Most of us did not make this
commitment when we first entered the work force,
and thus we have some catching up to do. Failing
that, our golden years are going to be closer
to the color of rust.
The
most frequent method of saving toward retirement,
occurs by way of the accumulated equity in our
homes. This is effective because we have to pay
someone for our home; and thus we are consistent
with this form of investment. If we actually lived
in the same home for the life of our 30 year mortgage,
we would end up with a valuable asset and the
freed up cash flow of no more house payments.
And the good news gets better because of the tax
benefits of home mortgage interest deductions.
Accelerated payments and even trading up to more
valuable homes, increases the dynamic of this
retirement strategy. If we have the ability to
do so, we can even buy a rental home as an investment.,
and let someone else make the monthly payments
for our additional real estate asset.
The
latest craze in mortgage lending is “Interest
Only” loan programs. This is a good way to
reduce your monthly expenses if you don’t
have a care about your future. Sure, there are
a few exceptions, but most people use the new
discretionary windfall for entertainment…
not investment. Once families become accustomed
to paying the minimum amount required to satisfy
the ‘interest only’ feature on their
loan, what is the likelyhood that they would ever
return to paying toward the ‘principle’
on their mortgage? Personally, this writer is
very concerned that at a time when Americans are
accumulating record amounts of credit card debt,
we are compounding the problem by instituting
another mechanism to live beyond our means. This
concerncertainly does not apply to those folks
who have adequate savings and or investment strategies
to provide for their retirement needs.
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Springtime
Lawn Care…
Now
is the time to fertilize your lawn as well as
aerate it to get a good healthy start before
the stress of the dry season takes hold.
Aerate
only after your lawn is thoroughly watered to
get good deep plugs. Then, after fertilizing,
keep it wet for a couple of weeks to prevent
burning the lawn. Some fertilizers contain iron
which will stain your drive and sidewalks if
you do not wash it off immediately after application.
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Should
I Pay Points ???
The
best way to determine if you should pay points or not,
is to perform a simple break-even analysis. To do this,
calculate the cost of the points; 1 point on a $200,000
loan is $2,000. Then, calculate the monthly savings
on the loan as a result of the lower rate; for example,
$32 difference. Divide the cost of the points, $2,000,
by the monthly savings, to come up with 62 months to
break-even. If you plan to keep the house for longer
than the 62 months, then it makes sense to pay points;
otherwise it does not.
What
are the benefits of zero point/zero fee loans? The main
benefit is that you have no out of pocket costs. If
you plan to stay in the new loan or keep the house less
than three years, it may be wise to pay a higher interest
rate and avoid the normal closing costs.
However,
if you keep the house long enough, you are better off
to pay the ordinary fees and enjoy a lower monthly payment.
In this example, if you plan to stay in the house for
more than five years, and if rates never drop for you
to refinance, you could wind up paying more money. If,
on the other hand, you plan to stay in the property
for just two to three years, there really is no disadvantage
to a zero point/zero fee loan.
To
summarize, zero point/zero fee loans in many cases are
good deals. Make sure however, the lender actually pays
your fees, not just increasing the loan amount to cover
the cost of the fees. In addition, you may have to come
up with some money at closing for recurring costs to
cover taxes, insurance, and interest; but these are
not loan fees.
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Where’s
My Lender?
Too
few loan officers make a habit of attending their client’s
closing. I am amazed that only about 30% of loan officers
make this a regular practice. How important does a business
deal have to be to motivate the deal maker to participate
all the way to the end? To be sure, loan officers who
do not
attend,
are avoiding being held accountable at the closing table
for any changes or surprises.
I
proudly declare that I attend every clients closing
which occurs in the metro Denver area.
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Our
Most Popular Loan Product!
We
are helping lots of first time home buyers with 100%
FHA financing…
Even
those with credit scores as low as 520, and bankruptcies
discharged at least two years.
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The 2005 Conforming Loan Limit of $359,650
is the break point before loans fall into Jumbo rates which are at a higher interest.
This figure is up $11,000 from 2003.
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Thank
You for Referrals From:
- Randy
Brown
- Larry
Ray
- Mary
Scherr
- Michelle
Progar
- Lonnie
Hackenberg
- Darrin
Robertson
- Leon
Vanderploeg
- Rita
Lenz
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FREE
NOTARY SERVICES !
As
a free service to our valued clients, we are happy
to notarize your document in our office at no
charge. Traveling notary service is also available
for a fee.
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