refinance

So, what happens when I can’t make my mortgage payments?

We are here to have the difficult conversation with you- the one about what happens when you can no longer make your mortgage payments.

First and foremost, ignoring the problem is only going to cause further financial hardship as time goes on. While pretending the problem does not exist may seem like the preferable option, it is the option that will certainly end in foreclosure. Addressing the issue head on is going to be the most effective, even though it is quite the “sticky” topic.

So, what can you do when you can’t afford to make your monthly payments? Here are a few recommendations that can serve as a lifeboat during tough times.

 

Communication is key

The minute you recognize you can no longer make those payments, it is crucial that you communicate that to your lender. The longer you wait to address the issue, the less options you may have. So, communicate!

Come to the conversation prepared. Have details on why you can’t make your payments and if it is a long- or short-term concern. It is also essential to include details about your income, debt history.

Foreclosing on a home is not necessarily the “best” option for your lender. Opening up these lines of communication with them (early) will give you the opportunity to find a solution that best addresses your current situation.

 

Refinancing

While refinancing can appear great, in theory, it is important to acknowledge the other fees associated with refinancing. Let’s say you have 10-15 years left before paying off your mortgage. Refinancing could provide the opportunity to extend the life of your loan, resulting in lower payments.

This is different for each situation, for each person or family. In order to determine whether or not refinancing is the best option for you, talk to your mortgage lender. They can provide more details on your unique situation.

Ditch the house

Easier said than done. And there are two different options you have here- short sale and a deed in lieu of foreclosure.

A short sale is when the bank allows the homeowner to sell the home for less than they owe on the mortgage. This option is sometimes considered less than desirable to lenders, because they are essentially receiving LESS money back than they originally lent. But, it is an option that is less damaging to your credit score (than, say, foreclosure).

Deed in Lieu of Foreclosure gives a homeowner the opportunity to sign the deed of the house over to the bank, rather than the bank foreclosing on the home. So, here, you turn the home over to your lender so they can, in turn, sell the home.

Before deciding that either of these are the next course of action for you, we recommending talking to a housing counselor and a tax professional. They can provide more insight into the implications of taking this step.

 

Bankruptcy

This is definitely not the easiest thing to do. It will destroy your credit, making it hard to borrow money for multiple years.

It is still possible to declare bankruptcy and keep your home. In a Chapter 13 bankruptcy, borrowers are still able to keep their home, but they must have a stable plan for repaying most of their debt.

While not your first line of defence, declaring bankruptcy is definitely still an option.

 

Time to rent

If you do not want to give up your home, but you can no longer afford your monthly payments, one option is renting out the house. Depending on the area you live in and the demand for rental properties, this may be a viable option for you. However, it is crucial to remember that becoming a landlord is not a “simple” endeavor. But if you are able to secure a renter and a secondary location for you to live while you are renting, this may be a way to save you from foreclosure.

So, whether you are on the verge of foreclosure or you have just stumbled upon financial hardship, we recommend you talk to your lender. The sooner you can open those lines of discussion, the more options you will have at your fingertips. And each situation is unique, so while these are some of our general recommendations, your lender will have information and details specific to your situation.

Total Home Lending

 

Natasha Mason

So, what happens when I can’t make my mortgage payments?2020-09-28T15:14:21+00:00

Home Improvements (that pay off)

Remodeling. There are entire tv shows and magazines, just on this topic. It has different meanings for different people.

Many of those tv shows highlight some projects on the extreme-side, people spending thousands of dollars on a beautiful bathroom. While stunning (and something you may be dreaming about), it may not always be the most realistic remodel for the majority of homeowners.

Taking on a new project can be quite expensive, but we are here to tell you that there are some that actually pay off! Whether or not you are considering reselling right now, it is important to recognize the “resale” value of your home with its new improvements.

 

There are a few things to keep in mind before starting your next remodeling project.

First, the return on your investment- how often will you be using or benefiting from it? For instance, replacing your front door has a great return because it is something that is essential to your home.

Next, you should also consider the value of other houses in your neighborhood. Spending a significant amount of money to remodel your home and, in turn, significantly increasing its value may not be ideal when it comes time to sell. Even if your home is valued at a certain amount, if the rest of the houses in the neighborhood are much less, you may find it difficult to sell your home for the price you desire.

There are three final things to consider before remodeling- the housing market in your area, how soon you’ll sell after the improvements and the quality of the project you are starting. If the market is up, many buyers will be interested in spending more money for a house with a newly remodeled bathroom. When it’s down, buyers are looking for the basics- like up-to-date systems.

Homeowners

Make your remodeling project beneficial and painless.

Do you want to be happy once your latest project has been completed? Of course! Everyone wants to be happy with the end result. There are a few factors that will make your project that much easier. Low-maintenance is key! The more involved, the longer it takes and the more expensive it is will make the project that much more stressful. Additionally, most homeowners are happiest with projects that are good (but not necessarily the highest) quality. And, finally, projects that are energy efficient are among these top factors.

 

So, let’s talk about the projects themselves.

Earlier we mentioned a few projects that people will be looking for in a home, whether the marketing is up or down. And that is up-to-date systems. No flooding in the basement. The roof is new (or relatively new). Clean and updated heating/cooling. Essentially, they are looking to see if the basics have been covered. Investing in these projects is a “must do” simply because it makes your house much more appealing, regardless of the marketing. And, truthfully, when the marketing is down, buyers are generally more interested in homes with up-to-date systems and an outdated bathroom than they are in homes with outdated systems and up-to-date bathrooms.

Most home buyers know that they will have to remodel. In fact, nearly 70% of them do. If they know that money could be spent on something more cosmetic than, let’s say, a new furnace, your house immediately becomes that much more appealing.

There are two rooms in the house where you can definitely tell if money has been spent- the bathroom and the kitchen. These are two of the most basic remodeling projects and should be added to your “must do” list when the housing market is up. While they do cost the most, just remember- people spend most of their time there!

Curb appeal. Otherwise known as landscaping. This does, in fact, pay off when you are looking to sell. Imagine walking up the driveway to a house with an overgrown lawn, a few scattered trees and maybe an attempt at a flowerbed. Now, imagine walking up the driveway to a house that has clearly been well-cared for. Beautifully manicured lawn, strategically placed flowerbeds and trees. Which house would you rather look at? The majority of people are more eager to view a house that has “curb appeal.”

The final two things on the list? More space- which, of course, makes sense. Additional square footage will add value to your home when it comes time to sell. And then all the little bells and whistles. Home entertainment systems, wine cellars. The little things that aren’t expected but get people excited.

 

Remodeling in a way that pays off is an absolute must.

Before jumping into your next project, take a minute to think about what will be the most beneficial for your home, and your situation.

One final thing to consider? Refinancing. Talk to your lender- the money you could save by refinancing could foot the bill for your next remodeling project.

 

Total Home Lending

 

Natasha Mason

Home Improvements (that pay off)2020-09-28T15:14:21+00:00

Refinancing: is it right for you?

Refinancing. That’s a term you regularly hear thrown around in the mortgage industry.

It is, in fact, exactly what it sounds like- replacing your current mortgage with a new one. While there are a variety of reasons that lead people to refinance, these are some of the most common:

The first is to lower your interest rate. If you took your mortgage during a time where interest rates were slightly higher, choosing to refinance could, ultimately, save you thousands of dollars. This type of refinance is typically referred to as rate-and-term refinancing. You refinance the remaining balance on your mortgage for a lower interest rate and a term (or number of years it will take to repay) you can afford.

The second reason to refinance is to convert an adjustable rate loan to a fixed rate loan. Just like it sounds, an adjustable rate loan has an interest rate that fluctuates based on market conditions. So, when interest rates are low, converting your loan to a fixed rate loan secures that low interest rate for the remaining duration of your mortgage.

The third is a way to “free up” cash. Typically referred to as cash-out refinancing, this entails taking out a new loan for a greater amount than your previous balance. You can then take the difference in cash or even use it to pay off other forms of debt.

Other reasons to refinance are to eliminate FHA loan insurance or even to settle a divorce.

The potential benefits seem pretty obvious. Lower interest rates means less money paid over the life of the loan. It even means you could lower your monthly mortgage payments. Having additional cash on hand. All of these benefits are compelling.

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To refinance or not to refinance

Refinancing, however, is not for everyone. There are a variety of other factors that contribute to the entire refinancing process. The length of your loan, the amount of money you owe, even the amount of time you plan on staying in that particular home.

Both the length of your loan and the amount of money you owe can directly affect the additional costs to refinance. These “hidden costs” are important to factor into your decision to refinance (or to keep your current loan). Cost of a house appraisal, loan origination fee, plus a variety of other costs for filing documents, purchasing title insurance and even fees for your new mortgage application.

 

Time to break out your calculator

Before you take the plunge, take a minute to crunch the numbers. Is refinancing something you can afford, at this time? And, will you ultimately save money over the duration of your loan?

The goal is to not only “break even,” but to do so in a time frame that is affordable and beneficial to you. Essentially, how long it will take for the refinance to pay for itself. For example, you have $2,000 in costs to refinance, but you are saving $100 in your monthly payments. In that situation, you will “break even” after 20 months of payments.

 

What now?

Are you considering refinancing? Take a look at your current mortgage and financial situation. You can even discuss the benefits of refinancing with one of our loan officers. In doing so, you can determine whether or not refinancing is the smartest move for you (at least for now).

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By Natasha Mason

Refinancing: is it right for you?2020-09-28T15:14:21+00:00
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