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How a 20-year home mortgage can save you money
How a 20-year home mortgage can save you money 1024 536 nathanburch
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The 30-year fixed-rate home mortgage dominates the housing market, particularly for first-time buyers who appreciate the ability to extend their home loan payments for the longest possible term.

The second most common fixed-rate loan term is 15 years, but many lenders also offer loan terms of 10 or 20 years. Sometimes lenders even offer a personalized term chosen by the borrower.

On average, a person will save a significant amount of interest when either purchasing or refinancing into a 20-year mortgage compared to a 30-year. Here are four reasons to consider a 20-year mortgage:

  • Save on interest:
    The most obvious reason is that the interest rate of a 20-year mortgage is typically one-fourth of one point to three-eighths of one point lower than a 30-year fixed mortgage. This means, on an average, a person will save a significant amount of interest when either purchasing or refinancing into a 20-year mortgage compared to a 30-year. Because of a shorter loan term and a lower interest rate, on a $280,000 loan amount, a borrower can save approximately $85,000 in interest over the life of the loan.
  • Pay off the loan faster:
    When a borrower is refinancing to get a lower interest rate, instead of taking their original 30-year mortgage and refinancing it into another 30-year mortgage, they’re able to take their original 30-year mortgage and refinance into a 20-year mortgage, which would potentially keep them on their payoff goal. Thus, they don’t have to start all over with a new 30-year mortgage.
  • Match the payoff to retirement goals:
    Let’s say a borrower is in their late 30s or 40s and their retirement plan is to retire in their 60s. Applying for a 30-year mortgage would push their potential payoff of their house into their 70s. Choosing a 20-year mortgage would keep them potentially on track for having their house paid off in their 60s.
  • Affordable payments:
    A 20-year mortgage is a good alternative to a 15-year mortgage, as many home buyers can’t stretch their budget to make the higher payments required to pay off a mortgage in 15 years, but yet they want to pay off the home faster. The borrower is still paying off the loan in 10 years less than a 30-year mortgage, and if the borrower ever wanted to, they have the ability to make extra payments.

Speaking with a Vellum mortgage professional will ensure that you obtain the mortgage that’s right for your story.

Source: Washington Post

FHA Streamline Refinance
FHA Streamline Refinance 1024 536 shannonleydig

FHA Streamline Refinance
The FHA Streamline Refinance program is a special refinance program for people who have a Federal Housing Administration (FHA) loan. It is the simplest and easiest way to refinance an FHA loan. Unlike a traditional refinance an FHA Streamline Refinance allows a borrower to refinance without having to verify their income and assets.

An appraisal might not be required either depending on how much you have paid on your original loan balance. One of the most advantageous aspects of this program is that it allows for an unlimited loan-to-value ratio. Therefore, if you are severely underwater you still may be able to take advantage of record low mortgage rates by refinancing with an FHA streamline.

Criteria for Qualifying

  • You have to live in the house you are refinancing.
  • You can’t have made more than two, 30-day late payments on your FHA mortgage in the past 12 months.
  • You have not completed an FHA Streamline Refinance in the past 6 months.
  • FHA does not have a minimum credit score required for a streamline refinance, but your lender might. Generally it’s best if you have a score of 620 or above.

FHA Streamline With Appraisal

The advantage of doing an FHA Streamline Refinance with an appraisal is that you are able to roll your closing costs into the loan. You are only required to have an appraisal if your new loan amount exceeds your original loan amount by 1.5 percent.

FHA Streamline Without Appraisal

If you do an FHA Streamline Refinance without an appraisal you are not able to roll your closing costs into the loan. Hence, you will need to be prepared to pay your closing costs out of pocket or talk to your lender about whether they can cover your closing costs in exchange for paying a higher interest rate.

Contact us for more information and see what works best for your financial story!

Source: Zillow

What’s the Point?
What’s the Point? 628 419 patrickgardner

What's the Point?

Your financial house is in order and you’re ready to make your dream of homeownership a reality. Now it’s time to get a mortgage. So what are these so called “points” and is there a point in paying them?

A “point” equals one percent of the loan. Discount points are used by borrowers to buy down their mortgage interest rate. It’s essentially an upfront interest payment to lock in a lower interest rate on your fixed-rate mortgage. So if you are borrowing $200,000, paying one discount point would mean paying $2,000 upfront at closing – but it may end up saving you more in interest payments over the life of the loan.

Deciding whether to pay more points for a lower interest rate or pay less/no points and pay a higher interest rate depends on your personal circumstances. They include factors like how long you expect to stay in the home and whether you can afford to make an upfront payment.

Interested in seeing how paying extra points might lower your rate? At Vellum we are experts in assisting you with your overall financial picture. Ask your Vellum Loan Officer for more details!

Source: Freddie Mac

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Should You Refinance to a Shorter-Term Loan?
Should You Refinance to a Shorter-Term Loan? 1024 683 patrickgardner

Should You Refinance to a Shorter-Term Loan?

New homebuyers often choose to take out longer term mortgages such as a 30 year term mortgage on their new homes due to the security and peace of mind that a consistent monthly mortgage payment provides. However, a 30 year term can be really long time! It is especially long when thinking about things like putting kids through college, saving for retirement or all the fun surprises life likes to throw your way.  

Paying off your mortgage sooner will free up a lot of cash that can be used for other upcoming commitments. It also means you will save money in interest over the life of your loan because you are paying down your mortgage significantly faster. But can you really afford to do it?

You have a steady and reliable income, you may be a prime candidate for mortgage refinancing because you can afford the bump in expense that a shorter term loan will most likely bring.

For example, a 30 year loan of $100,000 at 4.5% would cost roughly $506 per month (principal and interest). A 15 year loan at the same rate would be approximately $765. For home owners who currently already have some extra disposable income at the end of the month the $259 increase between the two terms would be manageable. Keep in mind, a higher debt to income ratio would be required on the 15-year term because of the higher monthly payments.

Refinancing a home for a shorter term makes sense for those homeowners who have an interest rate of 4% or higher and who have not refinanced in the past six months. It also would make sense for people who are looking to build equity in their home sooner.

Is there an option for homeowners who don’t meet the criteria to refinance? For those homeowners who are afraid of committing to a larger monthly payment or who can’t meet the new income to debt ratio that the shorter term requires, they can still get the same benefits by consistently paying extra on the principal of their mortgage. Another option might be a variety of shorter terms such as 20 years instead of 15 or 10.

There are many things to consider when refinancing a home. We are happy to take a look at your current financial picture and see what option would best work for you and your long term goals.

The post Should You Refinance to a Shorter-Term Loan? appeared first on Vellum Mortgage.

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