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By Carlos Parrague | Builder/Developer in Monrovia, CA
  • Just another reason why no realtor in their right mind should vote for Obama!

    Posted Under: Market Conditions in San Marino, Financing in San Marino, Agent2Agent in San Marino  |  October 17, 2012 11:03 AM  |  285 views  |  No comments

    This from just in from Heather Elias Director of Social Business Practice at National Association of Realtors

    Last week, I wrote a post here about the 3.8% tax that is part of the Health Care Reform Act, which passed in 2010. There have been numerous emails circulating that mischaracterized how the tax worked, and here at NAR we wanted to help people understand it better.  The post created a flurry of comments, and I thought we would address some of the points raised directly. (I'm taking some of my clarification points directly from The Top 10 Things You Need to Know about the 3.8% Tax.)

    • Yes, it is a tax. But it's not a sales tax, it's a tax on investment income.
    •  No, NAR does not support this tax. It was added  into the health care law at the last minute and was never considered in hearings.The tax will no doubt be debated during the upcoming tax reform debates in 2013.
    • When you add up all of your income from every possible source, and that total is less than $200,000 ($250,000 on a joint tax return), you will NOT be subject to this tax.
    • For the tax to apply to any profit or gain on a primary home sale, the profit/gain  must be more than the $250,000-$500,000 capital gains exclusion that’s in effect today. That’s gain, not sales price.
    • The tax applies to other types of investment income, not just real estate. If your income is more than the $200,000/$250,000 amount, then the tax formula will be applied to capital gains, interest income, dividend income and net rents (i.e., rents after expenses).
    • If you are concerned that this tax may apply to you, please consult your tax advisor.
    • NAR is nonpartisan and does not get involved in presidential politics.

    Here is a video with NAR's director of tax policy, Linda Goold, that does a very good job of explaining:

    http://www.youtube.com/watch?v=27T9adAq7oc

    And here are some more resources that could help explain:

  • Is it time to refinance?

    Posted Under: Market Conditions in Pasadena, Financing in Pasadena, Property Q&A in Pasadena  |  September 4, 2012 8:09 AM  |  295 views  |  No comments

    Wondering if now is the right time to refinance your mortgage? Before you make a decision, check out these pros and cons.

    Yahoo! HomesBy Jennifer Berry | Yahoo! Homes – Wed, Aug 29, 2012

    With some of the lowest recorded mortgage interest rates—around 3.5 percent or lower—according to the Mortgage Bankers Association, there's been a lot of buzz about refinancing.

    But how do you know if it’s the right option for you? Before you take the leap, it’s a good idea to weigh the pros and cons.

    To get started, let's take a look at what refinancing is and why should you consider it.

    According to the Federal Reserve—the central bank of the United States that raises and lowers short-term interest rates—refinancing means paying off your existing mortgage and creating a new one. In the process, you might change from an adjustable rate to a fixed interest rate, consolidate first and second mortgages, or take advantage of a lower interest rate—all of which could help you save money.

    In fact, "With the current international problems in Europe, China, and those in our country, interest rates have fallen to levels not seen since before I entered the industry in 1980," says Leonard Amescua, senior loan officer at Mark 1 Mortgage in La Palma, Calif.

    So if you're looking to refinance your mortgage—or just trying to figure out if refinancing makes sense for you—read on to weigh more pros and cons.

    Pro #1 - You Could Save Money

    Saving money is a main reason for wanting to refinance—especially when there are record-low interest rates.

    "In my marketplace where the average loan is in the $350K range, lowering the interest rate from 5.25 percent to 3.625 percent for a 30-year loan will adjust the payment from $1,932.71 per month to $1,596.18 on a new 30-year loan," says Amescua.

    Looking at this example, you could save over $300 every month, which could add up over a 30-year term.

    But keep in mind that factors like the size of your mortgage, your current interest rate, and your new interest rate could affect the amount of your savings.

    Con #1 - You Have to Pay Refinancing Fees

    If refinancing savings sound too good to be true, it's probably because you're not considering the fees you'll have to pay to start the refinancing process.

    "These fees can really add up," Amescua says. "Before you refinance, you want to make sure that the savings will outweigh the fees."

    But why are these fees so expensive?

    "The true closing cost of the refinance includes an appraisal fee, an underwriting fee, an escrow fee, title insurance, a recording fee, and a notary fee. Taxes, insurance, and interest are separate from this charge," adds Amescua.

    Because you will be paying for several types of fees, make sure to find out the full cost of refinancing before making a decision.

    For example, if you're planning to move in two or three years, the monthly savings from refinancing might not match the amount you paid in refinancing fees. Therefore, it might make more sense to refinance if you're planning to stay in your home longer than a few years.

    Pro #2 - You Can Adjust the Length Of Your Mortgage

    Believe it or not, if you pay a little bit more per month to change from a 30-year loan to a 15-year loan, you could ultimately save a good chunk of money on your mortgage.

    For instance, if you took out a 30-year mortgage loan of $100,000 at 5 percent interest, your monthly payments would be $536.82, and you'd end up paying $193,255.78 over the life of the loan. And the same loan ($100,000 at 5 percent) over 15 years would cost you $790.79 a month, but it would end up costing you $142,342.85 over the life of the loan.

    In case you don't have a calculator, that's a savings of $50,912.93. Plus, you'd be free and clear of your mortgage 15 years faster.

    On the other side of the spectrum, if you have a 15-year loan and can no longer afford the monthly payments, you can refinance to a 30-year loan. Yes, you may pay more in interest over the long run, but your monthly bill will be lower, allowing you more money to spend on necessities or to save for emergencies.

    Con #2 - You Could Lose Money Due to Unexpected Events

    What happens if you refinance and then end up having to move sooner than expected? Whether it's due to a new job or a failed marriage, you could lose a lot of money by moving out of your home soon after you've refinanced.

    Why? As mentioned in Con #1, the refinancing process includes fees and closing costs, which means that you want to make sure that the money you save overtime will be greater than the money you spend on the refinancing process.

    For example, if you paid $2,400 in refinancing fees to lower your monthly rate by $100, then had to sell your house in 18 months (at which point you would have "saved" $1,800), the payoff balance and cost would not cover the expense of the refinance. In fact, you'd be out $600 more than if you hadn't refinanced at all.

    However, with this same example, if you decide to refinance and stay in your house for 36 months, you could save $1,200.

    The takeaway here: You might want to hold off on refinancing if your job (or your marriage) seems shaky, or if there's a good chance you'll get that out-of-state job you applied for.

    Pro #3 - You Could Go from an Adjustable-Rate Mortgage (ARM) to a Fixed-Rate Mortgage

    If you have an adjustable rate mortgage (a mortgage where the monthly interest adjusts to reflect the current rate), you've probably experienced a lower monthly mortgage payment over the last few years, as interest rates have dropped.

    So why would you want to refinance to a fixed rate mortgage?

    According to Amescua, "the anticipation in the mortgage industry is that mortgage interest rates will eventually rise."

    Of course, no one can say for certain if, when, or how much interest rates will go up. But since we're looking at historically low rates dipping into the 3 percent range right now, it's a safe bet that rates will eventually increase again.

    If that's the case, it makes sense to lock in your interest rate now—while rates are low—rather than wait until rates go up again. Then you might be stuck with a larger monthly payment for the foreseeable future.

    Plus, a fixed rate could give you the peace of mind of knowing what your mortgage will be month to month - or save you money from future rate increases.

    Con #3 - You May End Up Paying More if You Have Poor Credit

    The unfortunate truth is, not everyone will qualify for the lowest rates available. Why? Because bad credit, or a low Fair Isaac Corporation (FICO) score, will lead to a higher mortgage interest rate, meaning you'll pay more for your mortgage over the long term.

    The term “FICO score” refers to your credit score calculated with software from the Fair Isaac Corporation. Basically, it’s a number that represents your creditworthiness—and one that you should keep your eye on.

    Why? Because according to Amescua, mortgage interest rates increase for every 20 point decrease in your FICO score.

    To help monitor your credit score, you can check your credit report for free at AnnualCreditReport.com, the only authorized source by the Federal Trade Commission for free annual credit reports.

    Unfortunately, when you want to see your FICO score, you'll need to pay for the report. Look to the three credit bureaus—TransUnion, Experian, and Equifax—to get access to that report.

    A word of caution: avoid websites that offer free credit scores. Often they will sign you up for automatic credit monitoring for a monthly or yearly fee.

 
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