Mortgage Impound Accounts - Q&A

Mortgage Impound Accounts - Q&A

I recently got a question from my buyers Alison & Matt who are the process of getting their first home in Atascadero.  She asked me:

Hi Traci!!  I had a quick question for you.  So I've been talking to a few people and we are questioning whether we really want to build our property taxes into our monthly mortgage payment.  I'm wondering if it's better for us to just budget that amount and move it into our savings (which earns interest) and just deal with paying it twice a year (I don't remember what it was).  I guess I would be more concerned about paying it if we didn't have a lot in savings.  My thought's are that it would make our monthly payment a lot more manageable and we could earn a little interest on the money as opposed to paying it with our mortgage. What do you think?    - Thanks!  Alison

My advice to Alison is if your lender is giving you the option to add it to your mortgage payment or not, do what you feel most comfortable doing. Some lenders don't always give you this option especially if you are putting  less than 20% as your down payment.  Adding your property taxes to your mortgage payment is called a Mortgage Impound Account.

Alison is right, she can save the money and build a small amount of interest on the money before she makes her payment. That interest is taxable money, so some may argue it's not worth the hassle of saving in a separate account accruing interest because you're taxed on it anyways.

By having an impound account many people enjoy the peace of mind knowing there is one less bill to worry about and that it's paid automatically. That's the no hassle situation.

Choose what makes the most sense for your situation, is my advice to Alison and to you.

Let me know if you have any questions about anything real estate related. I'm here to help!

"A Realtor that knows homes." Traci Ferguson 805-235-6396 traci@traciferguson.com http://www.traciferguson.com License #01875751, ecoBroker #16082

The Future Of San Luis Obispo Housing

The Future Of San Luis Obispo Housing

There will be a Central Coast housing Market Shift in the next coming 20 years. As baby boomers and their echo boomer children become homeowners, they will significantly effect the housing market. Echo Boomer children will make up approximately 65 million people born between 1981-1995. This will create a demographic challenge and opportunity.

The aging baby boomer population will swell the nation's senior population by 30 Million over the next 20 years. Typically people over the age of 65 are releasing more housing than they are absorbing, this demographic shift will help to increase the supply of housing. Currently we have a lack of affordable housing available for them to buy. With the economic downturn home construction was halted for over 7 years, creating a deficit in housing currently. With interest rates at record lows and banks wanting to lend money, buyers are competing for purchases on available homes on the market.

Generation Y, the Millennial Generation, Generation Next, Millennials, Net Generation or Echo Boomers. Whatever you want to call the world’s largest collection of twenty and thirty-somethings, they are coming to a town near you.

"A Realtor that knows homes." Traci Ferguson 805-235-6396 traci@traciferguson.com http://www.traciferguson.com License #01875751, ecoBroker #16082

How Much Home Can I Afford?... So Play House

How Much Home Can I Afford?... Play House

I am a very big fan of Money Queen Suze Orman. On one of her recent shows, she had a wonderful idea about figuring out how much home can a new buyer afford. Today I'm going to give you the tools to figure that out by "Playing House."

Step #1
* Choose how much home you want to buy.
* Only start this process if you have 20% down on this home of your choice.
* Go online and use a mortgage calculator and online resources to figure out the following monthly expenses:
       1. 30-year fixed rate monthly mortgage payment
       2. Monthly Property taxes
       3. Monthly Association Fees, (If it's a Condo, Mobile Home or PUD)
       4. Monthly Home Owners Insurance
       5. Monthly Home Maintenance (Yard, Periodic Painting, Termite Repairs, Roof, etc.)
*Total up all the costs for items 1-5, under step #1, and this will give you the total monthly cost of owning the home.

Step #2
* Use your total at the end of Step #1 and subtract it from the monthly rent you currently pay. This will give you the additional amount you currently would have to pay for a home of this price.

Step #3
* Start saving the additional amount you figured out at in Step #2 for 6 months.
* This will help you see what it feels like to own your own home.
* If this amount is too difficult, then you are purchasing too much house.
* If it's easy, you now have 6 months of saving to use towards your closing costs and down payment and you should call your favorite realtor, me, to begin your home search.

I hope this was helpful! This will also help you see if renting is comparable to the monthly cost of buying a home in this current market. Please comment below to give me feedback on this blog post.

"A Realtor that knows homes." Traci Ferguson 805-235-6396 traci@traciferguson.com http://www.traciferguson.com License #01875751, ecoBroker #16082

Refinancing to a Shorter Loan Time Frame

Refinancing to a Shorter Loan Time Frame

Changing the length of your mortgage time frame can save you big money. Interests rates are still very low and if you haven't reaped the benefits of Refinancing your home to a 3.5-4.5% interest rate, Do it! Many people refinance their home with another 30 year loan. But while you are talking to your lender, see if choosing a shorter time frame on your loan may save you money and possibly keep your payments close to where they are now.

 
I know you like examples like I do and I think this paints a vivid picture:
A current loan on your home of:
$400K at 5.75% interest for 30 years is $2,334.29 monthly

Refinancing the same amount for a lower interest rate and shorter terms looks like this:
$400K at 3.75% interest for 20 years is $2,371.55 monthly.

By adjusting the interest rate and the length of your mortgage you are paying almost exactly the same amount monthly, but the 10 years you took off the loan time frame has saved you over $271,172.13 in interest payments. $ 97,713.67 was saved in interest by doing a 20 year loan and $173,458.46 was saved by refinancing to a lower interest rate.  Isn't that Incredible!

Use my mortgage calculator to see what your monthly payment could be with a shorter time frame. Talk to your lender today to see if you qualify to do a refinance and if you can lower your length of the loan. Contact me if you need a lender referral. You will save yourself Mucho Dinero!

Remember, I'm always available for any of your referrals. Contact me today!

"A Realtor that knows homes." Traci Ferguson 805-235-6396 traci@traciferguson.com http://www.traciferguson.com License #01875751, ecoBroker #16082

Own a Home Close to Work and Save Money

What is the financial impact of living outside the city where you work?

A gallon of gas is currently $3.75 a gallon. A person that lives in Paso Robles and works in San Luis Obsipo uses up approximately 2.5 gallons of gas to go to work and return home on a daily basis. Based on only 20 days of work a month, that’s about 50 gallons of gas a month, or $187.50. This doesn’t include wear & tear, maintenance and automotive repairs costs. The cost for only gas for the year would be $2,250. Based on California's current Milage Reimbursement Rate of .55 per mile,  your monthly expense to commute an average of 35 miles to work would be $770 and your annual expense would be $9,240!

If you lived in the same city you worked you would save thousands of dollars a year in gas, wear & tear, maintenance and car repairs.

If the $2,250 was applied to your mortgage payment every year instead of towards gas, what would be the impact?  Based on a mortgage of $450,000 with a 3.75% interest rate for 30 years, you would be able to reduce your final payoff date to 26 years and 2 months and save $43,055.10 in Interest on the loan because it was paid off faster.

We all can’t live where we work, but if you are looking to shorten your commute, save time and money, give me a call to begin your search. I'm here to help.

"A Realtor that knows homes." Traci Ferguson 805-235-6396 traci@traciferguson.com http://www.traciferguson.com License #01875751, ecoBroker #16082

Refinancing Your San Luis Obispo Home Today Could Mean BIG Savings

Refinancing Your San Luis Obispo Home Today Could Mean BIG Savings

I'm sure you've heard interest rates are low and dropping. But what does that mean to you? Why should you care? By doing a quick mortgage calculation to see what your savings could be, it could mean extra money monthly for you and your family. I recently had my home refinanced (a Refi) and I'd like to to fill you in on the financial benefits.

We live in San Luis and our mortgage loan wasn't bad, 5.375%, but the interest rates that are currently available are like borrowing free money. There are rates in the low 3%'s that could save us hundreds of dollars a month. Here's a simple example to show you how a small drop in two percent of our mortgage interest saved us a ton of money.

On our mortgage loan of $400,000 for 30 years at 5.375% our monthly mortgage, not including our Property taxes, was $2,239.88. The loan for the same amount at an interest rate of 3.375% our monthly mortgage is now $1,768.38. The 2% difference in the interest rate is saving us monthly $471.50.  That is a large amount of savings a month!

A good rule of thumb is if your current interest rate on your home is more than 1% higher than the current rates, it's financially worth it to Refi your home. You have a loan for 4.25% and rates are currently at 3.25%, call your broker. Many brokers can also give you estimates on what your monthly savings would be and what the cost is to Refi. On our Refi the cost to do it was added into the mortgage loan so we had no out of pocket expenses. A huge plus. Call your mortgage broker today to see if you can save money on your interest rate. You will be so glad you did.

If you are looking for a great Mortgage Broker to help you with your Refi, please email me for a referral in your area. I'm here to help!

Click here to access a link to a Mortgage Loan Calculator to see how much you can save! You're Welcome...

"A Realtor that knows homes." Traci Ferguson 805-235-6396 traci@traciferguson.com http://www.traciferguson.com License #01875751, ecoBroker #16082

San Luis Obispo Real Estate Information

San Luis Obispo Real Estate Information

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"A Realtor that knows homes." Traci Ferguson 805-235-6396 traci@traciferguson.com http://www.traciferguson.com License #01875751, ecoBroker #16082