Mortgage Mistakes to Avoid
This topic has become increasingly more relevant with the restrictions and intricacies of the mortgage world. There are lenders out there promising things that they have no control over. The average homebuyer is under the assumption that they way to find a good mortgage professional is by shopping around and comparing rates and fees. Although this may be a way to save money in the short term there are a lot of other factors that should be considered.
If you are looking for a mortgage professional for a loan origination or a refinance, please reach out to me and I will put you in touch with 2-3 professional that are great at what they do, they have been pre-screened and are trustworthy individuals.
Contact me here! Keep reading and enjoy.
Mistake #1 – Paying Your Mortgage Before Paying Off Higher-Interest Debt
Do you love the idea of owning your home free and clear? It’s a beautiful dream, isn’t it? But if you have other, higher-interest debt, you should hear what our experts have to say before you make paying down your mortgage a financial priority.
“Homeowners should pay their higher-interest rate debt first before they pay their house off,” says Sam Suliman, a mortgage expert with over 20 years experience in the business.
Alex Gonzalez, a mortgage loan originator with Vintage Mortgage Group, agrees.
“Your home is emotional – it’s your foundation – and people want to pay that off as quickly as possible. But credit cards typically have 18-25 percent interest rates,” Gonzales cautions. “Even if your home loan is at 5 percent, you should never put extra money into your mortgage until you’ve gotten rid of your credit card debt.”
Want another reason to get rid of credit card debt before paying down your mortgage? Here’s one: “The interest you pay on your credit card balance is not tax deductable like the interest you pay on your mortgage,” says Gonzales. “It’s wasted money.”
Mistake #2 – Getting a Loan for “Free”
In this life, you don’t often get something for nothing. So when someone offers you a “no cost” loan, you might get a little suspicious. That’s good instinct.
Why? According to Gonzalez, “no cost” loans typically come with a higher interest rate than normal loans. That’s because the bank pays the loan fee for you – knowing that the higher interest rate you’ll be paying on the “no cost” loan will more than make up for what they spent on the loan fee, he says.
Here’s an example to help illustrate the point a bitter: Let’s say you want to refinance your $200K mortgage, and you plan to stay in your home for 10 years or more. You could either get a “no cost” loan at a 4.25 percent interest rate, or you could pay $5K in closing costs for a standard loan with an interest rate of 3.25 percent.
| “No Cost” Loan | Standard Loan | |
|---|---|---|
| Interest Rate: | 4.25 percent | 3.25 percent |
| Monthly Payment: | $983.88 | $870.41 |
| Total Interest Paid: | $154,196.72 | $113,348.55 |
The difference between your monthly payments with a “no cost” loan and a loan where you pay $5K in closing costs is $113.47 a month. But since the loan cost you $5K, we need to figure out your “break even” point.
$5,000 divided by $113.47 a month comes out to 44 months, or just over three and a half years. So you’ll break even on the $5K after four years and you’ll start saving money by paying a lower interest rate for the remainder of the loan.
In fact, even after paying $5K for a lower rate loan, you’ll save $8,616 after 10 years.
Bottom line? “If you’re going to be in your home for longer than 10 years, the no cost loan is probably not the way to go,” says Gonzalez.
Mistake #3 – Getting a 15-Year Mortgage, But Having No Financial Security
There are huge benefits to getting a 15-year mortgage. First, you’ll be paying your loan off in half the time of a traditional 30-year mortgage. Second, you’ll pay less in interest over the life of the loan. However, due to the higher monthly payments that often come with a 15-year term, this option isn’t for everyone.
For example, let’s say you’ve got a $200K mortgage at 4 percent. If you have a 15-year mortgage, your monthly payment will be $1,479.38 and the total cost of the loan over 15 years will be $266,287.65. The same loan amortized over 30 years will only cost you $954.83 a month, but the total cost of the loan will be $343,739.01. So, while you’ll save approximately $77k in interest with a 15-year loan, your monthly payments will increase by more than $500.
[Thinking of refinancing? Request a lender that fits your situation.]
The big question you need to ask yourself is, “Can I afford the larger monthly payment?” If you’re not sure, don’t panic – here’s some great advice for you.
“I think the best way to do it is to get the 30-year loan and make the higher payments. This way you make sure you’re in control of your finances in the future,” says Suliman. “You could take the money and invest it in something like stocks. But this way, it doesn’t strain your budget.”
Of course, this all depends on your income and financial security. If you could afford a 15-year loan, you could save a lot of money in interest. However, if you take on a 15-year loan without a clear understanding of your future finances, you could be in trouble. So, talk to your lender about what the best option for you is.
Mistake #4 – Not Thoroughly Researching Lenders
Gonzalez suggests that his clients think about this scenario for a moment: If you had a briefcase with $300K in it, and you were choosing who to hand it over to, you’d probably do some pretty thorough research, right? That’s essentially what you’re doing when you get a mortgage – so make sure you’re handing it over to someone trustworthy.
“When someone says ‘do you want a 1.9 percent interest rate?’ your first thought might be ‘yes!’,” says Gonzalez. But don’t fall prey to a lender simply because they told you something you want to hear.
If you’re unsure if you can trust your loan officer, it’s okay to ask questions and challenge them, Gonzalez says.
“Real professionals don’t get their feelings hurt if you have questions for them. People want to guard their savings and investments – so if someone gets upset if you challenge them on an opinion, you need to find someone new.”
Some questions you may want to ask a lender, says the Federal Reserve Bank of Boston, include whether or not your interest rate will be fixed or variable, and if the lender offers an introductory rate, when it will expire, and what the new rate will be.
Sneak Peek in Pickett Downs – Chuluota Home For Sale
This home is getting ready to go on the market in Chuluota and you get to see it here first.
Listing Price will be $375,000
Orlando Luxury Real Estate Market – Waterfront Properties
In an attempt to reassess the market for some of @thecoregroup’s more luxurious listings we are representing, I have studied the market as a whole to see what is actually selling with the following criteria:
- List price is over $500,000.00
- Property is over 4,000 sq ft
- The property is a waterfront property
I’ve searched both Seminole County & Orange County separately, so I will break them down below. The factors that I find to be important are the competition (or the current inventory), the average time on market (ADOM) of properties that have sold.
In this first graph you can see the running total of listings and sales in Seminole County that fit the above criteria for the last 6 months. Notice that an average of ONE of the average FOURTY available listings are closing on a monthly basis.
This graph speaks to the Average Days on Market (ADOM) of sold properties which is a poor reflection of the market due to limited sales. The other line in this graph represents the Sale Price vs. the Original List Price. It appears that the properties that sold in a relatively quick amount of time sold for a higher SP/Orig LP % while the homes that were on for significantly longer sold for a lower amount meaning they likely made pricing adjustments throughout their time on the market.
The average price per square foot is a difficult graph to truly understand, but I’m including it because it is commonly used as a rule of thumb for property assessment. The issue that properties like the ones we are talking about have feature differences and lot differences that make this a tough assessment. For instance, the best lot in town with a 4,000 sq ft home will likely sell at a higher price per sq ft than the worst lot in town with a 10,000 sq ft home. So, there is not a direct comparison that can be made.
You can see the same graphs represented above in the below slide show for Orange County as well.
THE GOOD NEWS!
The Greater Orlando Market Inventory (all properties) is at a 3 year LOW! This is good and bad (in my opinion). They are calling this a “seller’s market” but there are limitations on that…. Market Value and the role that appraisals are playing in keeping our sales prices suppressed. We also are experiences short term month to month gains which are being reported as market improvement which may prove to be just a momentary celebration. This is a discussion for another day, but the good side of this graphic is that sellers are able to quickly assess their market value based on the market reaction. One of 2 things happen when a new property is listed:
- An offer to purchase is received quickly, or
- No offers are received
This sounds so basic but the lack of competition in the market place allows for a quick read on the market value.
This discussion could go on further and will continue to change throughout 2013. My summary based on all of the above information is that we are in a good place in the real estate market at the moment, while luxury markets are left in the balance because of some amount of buyer uncertainty as well as a much smaller pool of buyers for luxury properties. This will take time to improve and I will be very interested to see the numbers for January when they come out in a couple weeks.
Thanks for reading…
~ JC
The Homestead Exemption – Everything you need!
WHAT IS A HOMESTEAD EXEMPTION?
Homestead Exemption is a tax reduction allowable to homeowners who make their property their primary residence. If approved, this exemption could reduce the taxable value of your residence by up to $50,000. The first $25,000 of this exemption applies to all taxing authorities. The second $25,000 of exemption excludes School Board taxes and applies to properties with assessed values between $50,000 and $75,000. As a result, the homeowner would enjoy a substantial savings on the taxes levied on their property by the various taxing authorities.
Homeowners must file an initial application once they have moved into the property. The Homestead Exemption will be automatically renewed each year and a renewal receipt will be mailed to them as long as NO changes have occurred to their exemption status. (i.e. mailing address, marital status, etc.)
It is, however, the responsibility of the owner to notify the Property Appraiser of any change in their exemption status. Florida law requires the filing of a new application when any title change is made.
HOW TO QUALIFY
As of January 1st, you must:
- be a legal resident of the county in which you are applying
- have recorded legal or beneficial title to the property on which you are applying
- be making the property your permanent legal residence
WHEN TO FILE
- January 1st through March 1st – Regular Filing time (For the current tax year)
HOW TO FILE
- File in person
- File by mail, or
- ***Online (my favorite)
New homeowners can expect to receive an original application with instructions on how to file. You can also call to have an application mailed to you. If you prefer, you can bring the required information to property appraisers office and they will be glad to assist you in filing. In any case, the application must be completed and submitted along with the proper proof of residency information.
You may also download a blank application from the Download button on our main page. Please provide your name, address and Property ID number at the top where requested. Property ID can be obtained from the Record Search .
WHAT YOU NEED TO FILE
Proof of residency information:
- If you drive you must provide a copy of your Florida Driver’s License that reflects the address of the property for which you are seeking the exemption. A copy of your spouse’s Florida Driver’s License is required even if they are not on title. (If more than one person is applying for exemption, the Florida Driver’s license reflecting the property address must be provided for each applicant)
- If you do not drive you must provide the following:
- Copy of Florida Identification card reflecting the property address
- Affidavit of non-driver , and
- County’s Voter Registration ID – This can be located on your county election site if you do not have your card
- If you are not a U.S. citizen, you must provide a copy of your resident alien (green) card.
- You must provide social security numbers for all applicants, their spouse or any occupant who may be entitled to the exemption.
WHERE TO FILE:
Seminole – Main Office: Hours: 8:00 a.m. – 5:00 p.m., Seminole County Services Bldg., 1101 East First Street, Sanford Florida, or, file online by clicking here.
Orange – Main Offic: Hours: 8:00 a.m. to 5:00 p.m. Monday – Friday, (Located in the SunTrust Tower, 17th Floor) 200 S. Orange Avenue Suite 1700, Orlando FL 32801, or, file online by clicking here.
Remember the deadline to file is March 1st!
Commercial Location on E. Colonial (SR 50)
The White Horse Inn on E. Colonial Dr. is on the market.
This video is to display the activity this location see throughout the day.
View the gallery below and also check out the listing by clicking here.
In an attempt to keep you aware of how our market is continually evolving, a video is included below which contains the most recent market stats. The video sheds light on how the market has shifted from a buyer’s market to a seller’s market in a domination of “traditional” sales.
*Word to the wise – Don’t be fooled by the terminology used in the video calling these “normal sales.” There is nothing NORMAL about most of these sales accept for the fact that there is buyer and a seller that is not a bank.
As you know, through the CRAZY market The Core Group has stayed [primarily] focused on traditional sales with the exception of properties being purchased by buyers we are representing and 10-15% (of our business) being seller represented short sales. We have NEVER represented a bank in any sort of transaction and will not begin to do so. From this standpoint we can confirm that we are seeing the statistics in this video ring true in our marketplace as it apparently is throughout all of Greater Orlando.
Watch this video and take the poll below after watching. Feel free to comment if there’s anything especially interesting you find.
~JC
One of the most important things to remember about commercial real estate is that this market ebbs and flows wholly separate of any other type of real estate. An office building and a house, for example, are valued and sold based on different criteria. Learn all about commercial real estate in this article.
Understand that when you get into commercial real estate, most of the deals are made towards the end of the bargaining process. Florida Real Estate For Sale. Thus, if you do not like the initial price that you are being offered, don’t panic, as you will have a chance to negotiate your price towards the end.
Always discuss the term of the lease. Landlords favor long term tenants therefore the longer term you are willing to sign, the more items you will be able to negotiate into the lease. It is better for your business too: a company with a stable office is more desirable to customers than one with headquarters relocated every six months.
Building relationships is important when you are in commercial real estate investment. These properties cost millions of dollars, more than most people can handle individually, so you usually have to work with partners. Also, a lot of commercial properties are sold without a market listing, the more people in your social network who are aware of what you are looking for, the more prospects you will find.
If you aim to get in a commercial real estate lease, you should watch out for increases in rent. These can be a fixed dollar amount or could be determined by a set formula. You need to be sure you do the proper amount of research beforehand to prevent you from being surprised by these sudden increases.
It is important to find a bank that is willing to work with you when purchasing commercial real estate. Commercial real estate is viewed and valued by financial institutions in a different way than residential real estate. Expect to come up with a higher down payment as well, about 30 percent and sometimes even more.
Due diligence is required for commercial properties as well. This requires you to get a property inspection, an appraisal, and inspections that are required by the local laws. This will cost a great deal of money. Houses For Sale In Orlando Florida. If you find that the property is not worth it and lose that money you spent getting the inspections, then it is money well lost.
To have enduring success in commercial real estate, have patience. Deals of this nature take more time than residential houses. These kinds of properties are more likely to finance your retirement than pay your current bills. Let them do what they are good at, which is help you in the long run, not just right now.
Once you understand that commercial real estate and residential real estate are completely separate, you can begin to understand how the commercial market actually operates. This will allow you to always make the best possible move. Tips like the ones you’ve just read in this article can help you along the way.
