Refinance Your Mortgage

For many homeowners that purchased or even refinanced their home about 2 to 3 years ago, thinking they cannot be a part of this refinance boom, are wrong!

Median home-sale price reaches an all-time high of $335,613!

What does this mean to you and me, those that are not selling their home?  Our home has increased in value, possibly to an all-time high!  With that, regardless if you refinanced 24, 36, or even 18 months ago, chances are you have more options than you ever thought possible.

So what do you do with this “found money,” or equity?  Here are a few things homeowners ages 24 to 84 are doing right now:

  1. First, they are solidifying their financial plan.  They are asking themselves, what will an infusion of cash mean to their finances?  What can or will they accomplish by refinancing their home?
  2. How much in consumer debt do they owe?  Outside of your mortgage, the average American household has over $35,000 in consumer debt.  $35,000 and rising.  The cycle of consumer credit cards is never-ending.  Personal loans at the touch of your iPhone.  Debt is increasing: what is your plan? 
  3. End of a mortgage.  The end of your mortgage for many seems too far off in the distance.  However, with rates still at historical lows, this is your chance to lock in a 15-year and save $100,000+.
  4. 2020 taught us we cannot just be employed.  Being an entrepreneur or a gig worker offers greater advantages than any job.  Now is the time to look at your financial plan, your home, and say I am ready to take the next step as an entrepreneur and open that storefront.  Expand your business.  Your home can make that happen.
  5. Ignore the hyperbole of politicians.  If you are waiting to have your student debt eliminated, do it yourself.  Take advantage of the equity in your home and pay off the massive student loan burden that you may be sitting on.
  6. Retirement.  Your home is the ultimate cash flow tool.  No, not a reverse mortgage, but the cash in your home that can supplement your income or healthcare needs post-retirement.
  7. Uncertainty.  Remember, markets come and go.  Rates come and go.  Cash has always been and will always be king.  When you have access to the cheapest money in the last 50 years, take advantage of it!

These seven are that just seven plans to use your home as a financial tool.  In other words, it’s what people call a smart money homeowner.  There are hundreds. You may never see a time like this again, or rates like this again.  Your financial situation quite possibly 20 years down the road will be shaped by the action you take today! Let get a plan together here: https://refi.com

Debt Management

Believe it or not, in this health-conscious world we live in, some people overlook certain dietary items.  There is such a thing as good cholesterol vs. bad cholesterol.  Good fat vs. bad fat.  The extreme of one or the other is not healthy in any way. Well, the same can be said for debt!

In regards to debt, too often we misunderstand what is good and what is bad.  Now as a homeowner, you have a unique opportunity to “up” your good debt portfolio and shed your bad debt.

75percent

Is there such a thing as “Good Debt?”

100% yes is the easy answer.  In fact, let’s look at debt and what it means to our credit score first and foremost.  Do you know the standard rule the credit bureaus use in terms of debt usage?

On credit card debt, the answer is 30% of the credit line.  If your usage goes over that amount, your credit score will decrease.  So from a credit score perspective, your usage of credit and what they deem as potentially bad debt can have a huge impact on future purchases and interest rates.  

Bad Debt Examples:

  • Credit Cards: Too many and use too much in carrying a balance.  Plus they are NOT tax-deductible.
  • Student Loans: These work as an inexpensive installment loan.  In some cases, they can be tax-deductible, but typically there is no ability to change the payment amount.  They do not have moving interest rates.  High student loans carry a high cost with no alleviation.
  • 1 Year Same as Cash: On the surface you believe you are doing a good thing.  However, the first negative that the company will not tell you is that they are using a finance company to write the loan.  When a company is viewed as a subprime lender, that decreases your score.  You show immediately as having a full balance — and there’s a ding on your credit score. Plus if you don’t pay it off, massive interest has been accruing.  This is also NOT tax-deductible.
  • Auto Loans: Everyone has them right?  Yes, but there is more than one way to buy a car.  With auto loans, paying interest even a small interest rate on a depreciating asset (meaning losing value) is a lose/lose proposition.  As a homeowner, you have the ability to buy a car or cars as a cash buyer and get a tax deduction.

The chart above does not illustrate the total, it is per credit card by age.  The average homeowner has 6 credit cards, not counting department store cards.

These are just a few examples of bad debt.  We could speak for hours on why you should never have a department store credit card, gas card, personal line of credit at the bank, or 100+ other examples.  It is about choosing your debt wisely. 

Good Debt Example The One You Need!

You may have noticed that in this section it is one example, not multiple examples.  The truth of the matter is your home is about the ONLY good debt on the market today.  Here is why:

  • First mortgage interest is tax-deductible (always consult your tax professional).
  • Credit bureaus do not ding you for being at your max LTV!  If you can get 80%, 90%, or 100%, you will not be penalized by the three bureaus.
  • Taking cash out of your home is nothing like a cash advance.  You will never pay 19% cash out rates like on a credit card.  Plus, the interest is tax-deductible.
  • You can reduce monthly expenditure or payments by 25%, 50%, or more by consolidating debt into a lower monthly payment.  That is a good debt.  By consolidating the debt, you have now improved your credit score.

Debt, like our calorie intake, is all about portion control.  Our financial health short-term and long-term is equally as important as our physical health.  There are numerous areas of bad debt, and so we encourage people to sit with our professionals and let us do a step-by-step assessment of your good debt vs. your bad debt.  You may be amazed at how the savings impact your bottom line.

financial checkup

It seems like an obvious question, however, it is often overlooked.  When considering a refinance, what is the health of your finances?  Homeowners often wait until they are in a difficult position to begin making moves.  That could be too late for lenders and yourself!

Questions You Should be Asking:

  • Are my credit card balances above 30% of the available credit line?  For example, if you have a $5,000 credit card, do you owe more than $1500.00? Do you know what that does to your FICO score? Did you know the average US family holds $31,000 in credit card debt?
  • Do you have student loans you are making minimum payments on with more than 5 years remaining?
  • Do you have auto loans in terms of 72 or 84 months?  Are payments becoming unmanageable?
  • Is your business running short on cash flow?  Are your receivables running longer than 90 days?  Considering an expensive loan from Kabbage?
  • Are you hearing rumblings or restructuring at work? The potential loss of time and income in the coming quarter or quarters?
  • Are you experiencing “too much month and not enough paycheck?” In short, the question is, are you outpacing your income in expenses, bills, and payment?
  • Are you overpaying your single biggest expense? Hint it is your mortgage.

A financial checkup is designed to give you a “30,000 foot look” at your money.  Too often, individuals and families spend their time looking at their finances from the 1st through the 15th and 16th through the 31st! They become accustomed to living in the moment.  It is time to break this cycle with our finances once and for all.

It’s Time to Take Action Now

If you fit any of the above scenarios or dozens of other potential financial pitfalls, the time to take action is now, and not wait until the event of the financial situation overwhelms you.

Sit with a professional and talk about your financial situation.  Have an unbiased 3rd party look at your financial picture from a number perspective.  It will be the best smart money move you make!

house photo

Without question, the last few months have reminded us that we need to expect the unexpected.  Whether it’s that you need to ensure cash reserves in the face of income loss, save for college, retirement protection, investments, or if you have plans of being an entrepreneur, we have tools at our disposal.

For the majority of Americans, our wealth is tied directly to our home. Bear in mind that as we’ve made our monthly payments, we got a return on our investment in the form of equity!  Depending on your circumstances, that equity is there for you to use in the form of cash-out refinance. You can use a cash-out refinance as a financial tool.

Right now, your plan should be to build up your emergency fund and/or max contribution to a retirement plan.  Or replenishing lost retirement savings. Investing in a college savings fund.  Or, for those that want to take it a step further, you can invest in the stock market or become a real estate investor. Let’s take a closer look at how you can use a cash-out refinance.

Expect The Unexpected

Financial wellness. We think of wellness often in nutrition, foods, and our bodies.  However, financial wellness is equally as important.  When you plan for the unexpected, you can deal with even the most stressful of events, with solid financial backing.

Remember the equity?  Yes, you can use this equity to ensure you are able to meet unexpected moments.  Now that the Fed has lowered short-term interest rates, what does this mean for you? Mortgage interest rates are lower.  Now that interest rates are lower you can accomplish two goals.  First, with a cash-out refinance, refinance your current mortgage to a lower rate and payment, cashflow!  Second, use that equity (cash-out) to put a plan and budget in place.

Emergency Fund

Regardless of your current circumstances, you must strategize to ensure you have a savings plan.  There is an old saying “too much month and not enough paycheck!” So how in the world do you save for an emergency?  Step one, we spoke about above.  Step two, debt consolidation.  Consider this scenario for a moment: If you have credit cards and student loans that cost you $800 per month in minimum or slightly above minimum payments.  You take those bills, use a cash-out refinance, and cut that in half or more?  Guess what, now you are saving about $400 per month for an emergency fund!

Smart money experts recommend having at least 3 – 6 months of necessary living expenses available.  Cash, not credit cards.  Why?  Simple: as one example, in the event of another emergency, you may not be able to pay your mortgage with a credit card.  There is a reason they say “cash is king.”  While utilizing two methods – staying at a maximum 30% level on credit card usage per month while also putting money away, you are emergency ready!

Building Retirement Funds

FACT and there is no other way to put it: tax-free money is the best money.  In fact, if you are a part of a company that has an employer 401k matching program, then tax-free and free money is the best money!  The trick is, you have to be contributing yourself.

As of 2019, the IRS allows you to contribute up to $19,000 per year to your 401(k). If you’re over 50, you’re allowed to contribute anywhere between $1,000 – $6,000 per year if your plan allows for catch-up contributions. The exact limit for these contributions is based on the type of retirement plan you have.

Are you familiar with the “Rule of 72?”  It is called the Theory of Compounding Interest.  In essence, whatever number you divide into the number 72, is the number of years it will take for your money to double.  12% into 72 means your money doubles every 6 years.  Whatever number, as this is for hypothetical purposes.  In short, retirement in your 401k or IRA allows your money and interest to compound tax-free.  When is the best time to start?  Ask a financial advisor, but the answer is right now.

If you’re behind in building retirement funds, taking cash out of your home is a perfect way to ensure you can retire and retire on time! However, do not rely on a cash-out refinance alone.  A solid plan, by incorporating elements of the above is critical.

College Fund

We have dealt with thousands of people. There has not been a single person yet that has said: “Yes, I want my kids to be crushed with student loans.”  No parent wants that for their children.  It is also not something you can save for in just one year.

The cost of college tuition will not go down. In fact, it is one of the fastest rising costs in the US.  With that, you need to be ahead of the curve.  A cash-out refinance is a perfect solution to begin or fully fund a college education.

These are just a few examples of what a cash-out refinance can do for you and your family.  How much equity do you have?  What is the right mortgage for you?  Will you qualify? Is the time right? Cash-out refinance is a powerful financial tool.  One that many people overlook.  You may have more equity and resources available to you than you even know.  Review this page, see what scenarios you connect with and what makes sense for you.

“Christmas On a Credit Card” sounds like a snappy catchphrase!  All too often though this is the reality for many families.  They are financing Christmas on a credit card or credit cards.  2020 has motivated more families to spend more as Christmas and Christmas celebrations will be very different.

According to Investopedia, the average family will spend $998 to $1433 this year on gifts.  This will not account for additional holiday expenses.  Since 8 out of 10 people will only make the  minimum payments on their credit card, this is what Christmas will cost you this year:

$1433 at 17.5% interest will take you 3 years and an extra $500 dollars in interest alone!

This also assumes a number of other factors:

  • You have no current balance on your credit card.
  • You will NOT add another penny to the balance.

The reality is that for most, that will not be the case.  92% of homeowners in the US according to CNBC have an average balance on their credit cards of $7200 and growing at 21% per month, excluding holiday expenses.

Christmas on a credit card is not a good idea.  Anything on a credit card is not a good idea.  No pun intended, but credit cards are a revolving cycle of financial insanity.  No matter the strides you make, the balance never goes away!  No stimulus, no tax return, will eliminate the average homeowner’s credit card debt.

So why not take advantage of the cheapest money in the market.  Pay something, a monthly “bill” that will pay you back.  Yes, as a homeowner, your monthly mortgage payment actually pays you back!  Let’s work out a financial plan that will ensure a credit card debt-free life.  Start with our calculator and see for yourself: https://refi.com/calculators/

Finance

Believe it or not, in this health-conscious world we live in, some people overlook certain dietary items.  There is such a thing as good cholesterol vs. bad cholesterol.  Good fat vs. bad fat.  The extreme of one or the other is not healthy in any way. Well, the same can be said for debt!

In regards to debt, too often we misunderstand what is good and what is bad.  Now as a homeowner you have a unique opportunity to “up” your good debt portfolio and shed your bad debt.

Winging it

Is there such a thing as “Good Debt?”

100% yes is the easy answer.  In fact, let’s look at debt and what it means to our credit score first and foremost.  Do you know the standard rule the credit bureaus use in terms of debt usage?

On credit card debt, the answer is 30% of the credit line.  If your usage goes over that amount, your credit score will decrease.  So from a credit score perspective, your usage of credit and what they deem as potentially bad debt can have a huge impact on future purchases and interest rates.  

Bad Debt Examples

  • Credit Cards: too many and use too much in carrying a balance.  Plus they are NOT tax-deductible.
  • Student Loans: These work as an inexpensive installment loan.  In some cases, they can be tax-deductible, but typically there is no ability to change the payment amount.  They do not have moving interest rates.  High student loans carry a high cost with no alleviation.
  • 1 Year Same as Cash: On the surface you believe you are doing a good thing.  However, the first negative that the company will not tell you is that they are using a finance company to write the loan.  When a company is viewed as a subprime lender, that decreases your score.  You show immediately as having a full balance — and there’s a ding on your credit score. Plus if you don’t pay it off, massive interest has been accruing.  This is also NOT tax-deductible.
  • Auto Loans: Everyone has them right?  Yes, but there is more than one way to buy a car.  With auto loans, paying interest even a small interest rate on a depreciating asset (meaning losing value) is a lose/lose proposition.  As a homeowner, you have the ability to buy a car or cars as a cash buyer and get a tax deduction.

Credit Card Debt by Age

The chart above does not illustrate the total, it is per credit card by age.  The average homeowner has 6 credit cards, not counting department store cards.

These are just a few examples of bad debt.  We could speak for hours on why you should never have a department store credit card, gas card, personal line of credit at the bank, or 100+ other examples.  It is about choosing your debt wisely. 

Good Debt Example The One You Need!

You may have noticed that in this section it is one example, not multiple examples.  The truth of the matter is your home is about the ONLY good debt on the market today.  Here is why:

  • First mortgage interest is tax-deductible (always consult your tax professional).
  • Credit bureaus do not ding you for being at your max LTV!  If you can get 80%, 90%, or 100% you will not be penalized by the three bureaus.
  • Taking cash out of your home is nothing like a cash advance.  You will never pay 19% cashout rates like on a credit card.  Plus the interest is tax-deductible.
  • You can reduce monthly expenditure or payments by 25%, 50%, or more by consolidating debt into a lower monthly payment.  That is a good debt.  By consolidating the debt, you have now improved your credit score.

Debt, like our calorie intake, is all about portion control.  Our financial health short term and long term is equally as important as our physical health.  There are numerous areas of bad debt, and so we encourage people to sit with our professionals and let us do a step-by-step assessment of your good debt vs. your bad debt.  You may be amazed at how the savings impact your bottom line.

Mortgage Debt

If you speak to 100 people, chances are you may get 90 different answers.  As consumers and homeowners, we look at our bills differently.  What is the most expensive?  What is the one that nags at you the most?  Let’s break it down:

–  Credit Cards.  Without question, we all feel the burden of credit card debt.  It seems like no matter how hard we try, we simply cannot get off the roller coaster of pay off, max out scenarios.

–  Auto Loans. Auto loans or leases is one bill that many regret.  Possibly the better way to put it, buyer’s remorse.  Today, consumers are more apt to accept an 84-month loan and a car payment upwards of $800 dollars a month.  No doubt this is an expensive bill. 

–  Student Loans. Student loans can be suffocating at times.  Because of the amortization schedule, it is a big monthly payment.  You are staring down the barrel at years paying off $100K worth of debt.

Credit cards are often mistaken for your most costly expense. A day does not go by that you hear about eliminating credit card debt.  You may see interest rates at 12%, 14%, or even 21%.  On the surface that would “feel” like your most expensive monthly bill.

There are many examples we could run through.  However, there is a notable exception: your mortgage.  Often we think of our mortgage in terms of payment and rate.  Rarely do we look at our mortgage as our most expensive monthly bill.  In the end, it truly is.

Mortgages often get lost in just being seen as a payment.  Many people are comfortable on some level with their 30-year or 40-year mortgage.  However, the overall cost is what makes it the most expensive monthly bill.

We are conditioned not to overspend.  We research cars on carfax and other resources.  We use websites to find a low balance transfer option for the lowest cost to our credit cards.  However, we forget a simple exercise to understand our mortgage.  Try this:

 

Mortgage:  $336,000

Term:  30 Years

Rate: 4.5%

Payment: $1651.39 – just principal and interest only.

Take $1651.39 x 360 =  $594,572.40 

 

OR

Mortgage: $336,000

Term: 30 years

Rate: 2.5%

Payment: $1287.78

Take $1278.78 x 360 = $463,600.80

 

First, your monthly payments decrease by almost $400 per month, great savings!  However, overall you are saving almost $132,000.00!  This is why your mortgage is your biggest monthly expense.

As homeowners, it is easy to get caught up in the “here and now” mentality.  Credit cards and student loans.  However, you are better positioned to deal with those payments once you deal with your biggest expense, your mortgage.  Start at the top and work your way backward. The solution both short-term and long-term starts and ends with your mortgage.  

Calculator with wooden house and coins stack and pen on wood table. Property investment and house mortgage financial concept

It seems like an obvious question, however, it is often overlooked.  When considering a refinance are you in a good financial position?  Homeowners often wait until they are in a difficult position to begin making moves.  That could be too late for lenders and yourself!

Smart Money Questions You Should be Asking:

  • Are my credit card balances above 30% of the available credit line?  For example, if you have a $5,000 credit card, do you owe more than $1500.00?  

Smart Money Says it is time to take action.

  • Do you have student loans you are making minimum payments on with more than 5 years remaining?

Smart Money Says it is time to take action.

  • Do you have auto loans in terms of 72 or 84 months?  Are payments becoming unmanageable?

Smart Money Says it is time to take action.

  • Is your business running short on cash flow?  Your receivables are running longer than 90 days?  Considering an expensive loan from Kabbage?

Smart Money Says it is time to take action.

  • Are you hearing rumblings or restructuring at work? The potential loss of time and income in the coming quarter or quarters?

Smart Money Says it is time to take action.

If you fit any of the above scenarios or dozens of other potential financial pitfalls, the time to take action is now, not until the event of the financial situation overwhelms you.

Sit with a professional and talk about your financial situation.  Have an unbiased 3rd party look at your financial picture from a number perspective.  It will be the best smart money move you make!

Managing Debt

If 2020 has taught us anything, even the most “secure” companies and industries are laying people off.  Those left behind regardless of position have been asked to do 2x or 3x as much with the same compensation.  Maybe now, you have the itch to do your own thing!

What is Considered Smart Debt, in Starting a Business?

Debt without question is a natural course of doing business or being an entrepreneur.  Just like our personal lives, there is good debt vs. bad debt.  Let’s break it down:

  1. Credit card balances and cash advances.  No, never.
  2. Kabbage.  This service will lend based on accounts receivable.  High lengthy costs.
  3. Factoring.  Same concept as above, but even more expensive.
  4. Loan against 401k.  No, no, no.  Did we mention NO!
  5. Title loan on your car.  32% interest (varying by state) is a no-win situation.
  6. Borrowing from friends and family.  Only a good idea if you never want to talk with them again.
  7. SBA loan.  Sounds simple on paper.  In reality, it is very difficult to get.  You have to not “need” the loan to get it.

The above are perfect examples, and yet still more exist. Another risk is using the wrong assets to start your business.

Good debt, or smart debt, is about managing  your risk and money.

It is about taking the pressure off your business to have the ability to pay you immediately.  It allows you to have a low-interest rate and a long term that can be tax-deductible.  Good debt?  That is your home.

People would say never put your home on the line!  Well, the reality is your home is always on the line.  Whether you utilize smart debt, good debt, or refinance.  

Here are a couple of ways you can utilize a refinance:

  1. Your ability to pay off all your debt to a single payment.  Savings of a hundred, maybe even a thousand plus per month.
  2. Securing your best asset (your home) to the lowest possible payment with cash out!
  3. Keep your cash in the bank.  Let’s say you have $40,000 in savings and $40,000 in available equity.  Cash is king, keep that in your bank balance.  Borrow $40,000 in the form of a refinance to start and run your business.

Experts are experts.  There is smart risk vs. high risk.  There is smart debt vs. bad debt.  Refinancing your home for rate and term or cash out is the most powerful business tool you have (outside of yourself).  Use good debt smart debt to build your business and your dreams.

mortgage options

The American Dream has been and will always be the joys of homeownership.  Do you remember that feeling walking into your home for the very first time?  Do you remember the sights, smells, and the butterflies?  It is truly a moment in time that stands still for many!  Somewhere along the way, we made the financial side of it just like a Costco!

Costco and Mortgages

Speaking of Costco, did you know they do mortgages?  Yes, now the old joke can be “get 100 rolls of toilet paper and a mortgage along.”  We are not here to say that the people working for the mortgage arm of the company aren’t qualified.  However, this fits the narrative of the industry today for consumers.  

Costco: “One Size Fits All.”

Somewhere along the way over the past 15 years, mortgages have to turn into this one-size-fits-all scenario.  What is the difference in toilet paper or paper towels?  Well, that is the feeling with mortgages.  However, you shouldn’t have a one-size-fits-all solution. This applies to your finances, your retirement, your bills, your college aspirations for family, vacation homes, and investment property.  Can you achieve this in the chips aisle at Costco?  If you could, would you want to?

Costco vs. Customized Solutions

As an avid reader of our site (thank you) you know our feelings on the power of mortgages.  You know our feelings on what the right, customized refinance can do for you today and future.  How a mortgage should be a means to an end a financial tool:

  1. Freeing cash flow to fully fund a 401k or ESOP.
  2. Paying for major purchases such as college tuition or a wedding.
  3. Using the equity in your home to start a business.
  4. Allow you to become an Airbnb investor.
  5. To become 100% debt-free.
  6. Allow you to retire early.
  7. To provide in-home senior care for yourself or spouse.
  8. To help your kids start their adult life debt free.

While we don’t want to pick on Costco, we want people to truly understand the power that you hold in your home and its vehicle, the mortgage.  You need to treat it as such.  Mortgages and the meat section simply don’t mix.  Life decisions should not be taken lightly.  The expertise you require in achieving the ends of your means. That journey begins here.