Fantastic Rates! Now Is the Time to Seek a New Home Mortgage
Mortgage interest rates are experiencing all-time lows. This makes them attractive to homebuyers. This is a great solution for anyone who wants to refinance without any financial obligations. Here are some reasons why you should purchase a home with a new home mortgage.
Buy a Personal Residence
The Mortgage Bankers Association said that an unpredictable housing market and economic uncertainty are two reasons why mortgage applications have declined in the past few years. The decrease in applications doesn’t mean you shouldn’t purchase a home. In fact, you should take this advantage since the low mortgage rates and home prices have made it possible to own a home.
One benefit to owning a home includes having federal income tax deductions. You also have the freedom of not living in an apartment complex surrounded by neighbors and paying monthly rent. While the mortgage amount may be higher than your monthly rate, at the end of the year, you can write off the mortgage interest, so you can get your money back. You also own your property without having neighbors close to you.
The reduction in mortgage applications has to do with the hurdles that homebuyers face when qualifying for these loans. Two common requirements for loans are issuing a down payment and having two years of regular income. Income documentation is difficult for those who have irregular wages, are self-employed, or suffered through temporary unemployment.
Purchase Rental Property
There are some people who use cash to purchase rental properties. But there are some who use a mortgage to better their leverage. One benefit of taking out a new home mortgage is that the person who uses cash while financing rental property can use that cash towards other payments. The low-interest rates are one of the reasons why people take out mortgages.
For example, if you take out a mortgage with a 4.5% interest rate and rent while you make a few dollars per month, the return could match the cost of the rate. There are plenty of advantages and tax write-offs when it comes to renting or owning real estate.
Since mortgage insurance isn’t an option for most rentals, a payment of 20% or more will do. You should also make sure that you have enough money to make the payments in case your tenant fails to pay rent or moves out unexpectedly.
Refinance to Get a Better Rate
The low-interest rates can rate- and term-financing an attractive option. This type of loan is a refinancing option where the interest rate or monthly term could change, but the amount never changes. The only benefit of this loan is that it reduces your monthly overhead and restructures your loan so you can get a lower payment. But, it’s still not as cheap as a mortgage.
This allows you to lock into a lower fixed interest rate that never increases based on the market. But homebuyers who are interested in refinancing need to provide documentation and have a good credit score. It’s also important to have some type of equity for this type of loan. This can be a challenge since most homeowners don’t know the value of their property.
If your loan costs more than your home, join the Home Affordable Refinance Program, also known as HARP, through the Making Home Affordable Initiative. If you borrowed a loan from the Federal Housing Administration’s Short Refi program can help you refinance. Otherwise, you should consider taking out a mortgage thanks to their easy application process and lower rates.
Refinance to Cash Out
A line of credit or home equity loan is another great way to receive cash for a wide variety of needs such as home repairs, paying off debts, or remodeling. Many benefits to this include available cash, income tax write-off, and low-cost debt. The only downside to this option is that you can’t borrow if your mortgage is more than your home’s value. You would then have to income-qualify for the increased amount as well as the cash-out limit.
Don’t assume that taking out a loan equates to having free money. A cash-out refinance can put you in more debt, which is not a smart idea. One reason why most homeowners are struggling financially is that they’re using their homes as checking accounts. They should break this cycle by taking out mortgages.
Help a Family Member Buy a Home
Co-signing to a loved one purchase a home may seem like a good idea at first. It’s an easy way to get fast approval. But those nice feelings are the only added benefit of co-signing a loan. Co-signing or adding onto someone else’s debt is a bad idea. You should take out a new home mortgage to avoid getting anyone into more debt.
There’s no need to co-sign for anyone unless it’s a close relative since you’re taking a risk with your credit. It’s not recommended unless in emergency circumstances. Becoming a co-signer involves more disadvantages than advantages since the co-signer is legally responsible for the payments. If the borrower is unable to pay back the loan, the co-signer will be in trouble.