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Playing the Waiting Game Could Cost You

Interest rates have been at historically low levels this year due to the COVID19 pandemic. Many people have taken advantage of these great rates by purchasing a bigger or more expensive home with the same or more affordable payment. And even more people have taken advantage by refinancing their loan into a great low rate. However, even with rates at extremely low levels there are still many people wondering if it’s a good idea to wait and see if rates get better before purchasing a home or refinancing.

One thing that is not often considered when it comes to playing the waiting game with interest rates is the amount of money you could be saving while you wait for interest rates to lower. 

Even if rates do improve in the future, the money that could be saved during the waiting period may be significant. A few hundred dollars saved per month could add up to potentially thousands before a lower rate opportunity arises. The forecasted appreciation is 2.0% in just the next  months. This means a home worth $350,000 today would be worth $7,000 more in 6 months.

If you are playing the waiting game you are missing out on the potential appreciation and ammonization of your home. It could take many, many years to recoup the money you have lost.

While it is true that we don’t know if rates are going to go lower, we do know that they will eventually go higher. Why risk the chance of missing out on a great low rate and savings each month? 

It could take a long time for the savings of a lower rate in the future to make up for all the money that was lost by waiting for interest rates to lower again.  And remember, there’s no guarantee that rates will go lower.

Besides should rates drop significantly, we can always refinance you in the future.

It’s important to weigh the individual options for your situation and I’m here to help you do that. If you have any questions on a home purchase or refinance give me a call, 801.206.4343. I would love to answer any questions you have and discuss the best option for your specific situation.

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Bidding Over Asking Price: Is paying over asking price okay?

First of all, I fully support it if it’s a house within my own neighborhood. 🙂

Joking aside, the real answer depends on the situation. How long do you plan on staying in the home, how many other offers are you competing against, what is the real value of the house, etc. So, when is it ok or not ok to overpay for a house?

In today’s world of low inventory, buyers are finding it harder and harder to get a house. Most houses are selling within hours of hitting the market with multiple offers and for over asking price.

It can be gut wrenching writing an offer for $315,000 when the house is only listed for $300,000. It would be like going to the Cadillac Dealership and looking at a car with a sticker price of $30,000 and telling the sales person, I know this car is for sale for $30,000 but I would like to pay you $35,000… What kind of crazy person would do that?

Sometimes what a house is listed for isn’t always what the house is worth. Joe Reardon, with Keller Williams says, “Writing an offer over asking can be ok, provided you are working with a good real estate agent who can look at prices and help you make a reasonable, value based decision. For instance, we are currently working with a buyer on a home with a list price of $600,000. We ended up going under contract at $651,000. From looking at the comps we felt the home was under valued at $600,000. The appraisal actually came in at $655,000! Having somebody who can interpret the data matters.” In some cases, we have even seen a strategy where listing agents are under listing the house to garner more attention and instigate a bidding war to raise the price.

Another thing to consider is what is the real value of an object or a house? The value is what someone is willing to pay, and not necessarily what the seller is asking. One of my clients wrote an offer last week on a town-home. There was a total of 24 offers made on this town-home, all of the offers came in higher than the list price. If there are 24 other people willing to pay more for the town-home, is the value the list price?

Being a buyer in today’s market is difficult. To me, it feels like a war zone. It can be tough writing offer after offer and not getting accepted. Some of my clients have felt so discouraged they told their agent “write the offer for whatever you have to do to get us under contract. If the appraisal comes in lower, we will just try to negotiate later.” We have seen other situations where the buyers are waiving the appraisal contingency altogether and agreeing to buy the house no matter what the appraisal comes in at.

Let’s look at it from a different perspective. Maybe, it is not overpaying for a house, but future paying.

Here is a real example for one of my clients. She fell in love with a house in Riverton listed at $450,000. We did the research and learned the seller paid $280,000 for this house in 2013. This house has appreciated $170,000 in the last 7 years! This seems like a crazy amount, but it is actually only 8.6% per year.

Let’s pretend you were the client and really loved this house. Knowing that there are multiple offers, how much is ok to overpay, or future pay for this house? See the chart below. If we were to bid $9,000 over asking price the value should exceed the bid over, ask in January of 2021 which is only 5 months away. This is based on an average of 4.3% appreciation. With this rate the house is forecasted to appreciate $93,000 over the next 5 years.

Let’s also not forget that terms are just as important as price. It is often not the price of the house that is most important, but the price of the monthly payment. With today’s record low interest rates, you can lock in 30-year fixed rate below 3%.

Justin Udy with Century 21 Real Estate says, “It makes sense for a buyer to pay over asking if the home is of more value to the buyer than the asking price. The list price and perceived price are two different things. Ex. It may be in the exact school district they want, walking distance to work, same neighborhood as family, have all the amenities they want, the condition and quality surpasses the competition, etc… In the end, real estate is the price where a buyer and seller meet. Asking price is a request or suggested price not necessarily the value of the home.

While it still feels crazy to me to walk into a Cadillac Dealership and offer $35,000 for a $30,000 Car maybe it’s not so bad if it’s the exact car I want, there are no other Cadillac’s available for sale, and there is a line of people out the door all wanting to buy the same car.

In today’s market you may have no other choice then to make an offer above list price, but I do not think that should deter you from buying now. Even in today’s market I still believe wholeheartedly in one of my favorite quotes, “Don’t wait to buy real estate. Buy real estate and wait.

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Refinance Fee Pushed to December

On August 12th Fannie Mae and Freddie Mac made an announcement for a new adverse market refinance fee set to go into effect for loans delivered after September 1st. The fee is “supposed to” help supplement the projected losses both Fannie Mae and Freddie Mac are anticipating experiencing this year due to the current economic uncertainty from COVID19.

The fee would be a 0.5% hit to pricing of the loan amount that will be applied to all refinances. This is the equivalent to a $2,000 increase in closing costs on a $400,000 loan, or an interest rate increase of approximately 0.125% to 0.25%.

Those of us in the mortgage industry were surprised and upset to find this hit was added over night and affected a lot of loans already in process in August. Rates that we had already locked were now going to have a 0.5% hit. As a company we decided to not pass this along to our clients and were going to bear the cost with no additional charges to those already in process.

The mortgage industry was in an uproar over the surprising announcement and decided to call on the Federal Housing Finance Agency (FHFA) to reverse the decision. Our lobbying efforts were partially successful. The FHFA announced that they advised Fannie Mae and Freddie Mac to postpone the refinance tax going into effect until December 1st. The delay was to give sufficient notice of the new fee to lenders and borrowers. Both enterprises agreed to postpone in order to not impact loans right away.

My personal opinion is that this was an orchestrated move. If they would have announced that this fee would start in December everybody would be upset. But if they announce it starts in September, then postpone it until December, everybody is happy about it. Refinances make up 2/3 of all mortgage transactions so this fee is a huge win for Fannie and Freddie because it will mean an enormous amount of money back in their pockets. Not only is this new fee a conspiracy for more money, it also could not have come at a worse time as we are in the middle of a pandemic and trying to come out of recession.

With the new fee set to hit refinances delivered after December 1st. Keep in mind that this fee is based on the delivery date to Fannie Mae. Loans that close in the 2nd half of November will be delivered in December. We will begin to see it affect refinance transactions that start in October. I highly recommend locking in your refinance in September or first part of October before lenders add back this 0.5% fee to the rate sheets.

For those of you waiting for a rate drop it’s a true that we don’t know if rates are going to go lower, but it is a fact that when this fee is added back in refinance rates will go higher by about 0.125% to 0.25%. When you combine this hit with the risk that the election could cause interest rates to go higher I believe it is best to jump on this opportunity now before you have to incur the new fee on top of a potentially higher interest rate.

If you have been thinking about refinancing now is the time!

Give ALV Mortgage a call today and let’s get started on running the numbers for your loan so we can lock in your interest rate before the fee goes into effect this fall.

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ALV Mortgage Can Help Set You Up For Financial Success

Some look at their mortgage as being a lifelong payment, others look at it as an opportunity for investment that could one day bring in cash flow.

In today’s blog we are going to look at two of our borrower’s that took advantage of the current low interest rates to refinance their loans to help set themselves up to achieve their financial life goals.

 Firstly, we have Brandon. Brandon’s goal is to buy a new house in a few years and convert his current one into a rental. He wanted to lower his current mortgage payment so that when the house is converted to a rental, there will better cash flow. He reached out to see what we could do to secure him a better rate and lower his monthly payment.

His original loan began back in July 2019 with a rate of 3.75%, a monthly payment of $1,358, and total interest over the life his loan was set to be over $143,000.

After running the numbers, we found that we could refinance him into 29-year term and not have to reset his mortgage with another 30-year term. We got him an amazing new rate of 2.82%, his monthly payment dropped to $1,267 and his total interest over the life of the loan decreased to $101,491.

Thanks to the refinance Brandon now plans to pay off this house before he is 60 so he can use 100% of the rental income to supplement his retirement income.

What a fantastic plan that we are happy we were able to help him set into motion!

Our second borrower, Shelly, was referred by her brother in law after he told her how much she could save by refinancing into a 15-year loan with me.

Shelly originally bought her house in 2017 with FHA rate of 3.875% and a monthly payment of $1,670. Being in an FHA rate meant she would be paying mortgage insurance on top of her interest charges for the life of her loan. That put the total interest over the life of her loan over $166,000. The only way to remove mortgage insurance is to refinance.

At first, she was really skeptical and did not think it was possible. However, there was no reason for her be nervous because we were able to get her a great new loan!

Shelly was able to refinance into a conventional loan with a 5-year fixed rate of 2.625%. Her new monthly payment was $3 higher than her original payment, but she shaved 12 years off her new loan and after removing the mortgage insurance we were able to lower her total interest paid over life of loan to $45,541.

This refinance was able to save her about $121,000 in interest charges! Her house value went up, now at an 80% loan value with no mortgage insurance.

Shelly is only 37 years old and is beyond excited that she is now set to have her house paid off before she turns 52!  This completely changes her outlook on her retirement.

Both borrowers had completely different stories and completely different loans, but one thing in common; they both needed a refinance option that would help them achieve their financial goals.

ALV Mortgage loves helping people achieve their goals. We have a knowledgeable staff that knows the ins and outs of the industry to help get you the best deal possible for your loan.

If you too are wanting to set yourself up for future financial success give us a call today. We may know a few tips and tricks to get you into the rate, term, or monthly payment that you are wanting.

801.206.4343, NMLS # 888979

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“Most Helpful Experience I’ve EVER Had Buying a Home”- Stoddard’s Reviews

“AVL Mortgage is amazing and I highly recommend them for your home buying experience! I was working with another mortgage company for 3 months with no success. AVL Mortgage was recommended to me by a friend and in 1 months time we are closing on our new house!! The people here are very thorough and good to work with. I will always recommend them to my friends and family and will come back again when I’m ready to buy or refinance.” -Brandon Stoddard
“Absolutely the smoothest, easiest, and most helpful experience I’ve EVER had buying a home! They were so attentive to the details and quick to help us through every step! I would HIGHLY recommend ALV Mortgage to anyone!” -Nicole Stoddard 
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“ALV Mortgage is A1” -McBride’s Review

Anthony and team at ALV Mortgage are A1! I think ALV Mortgage is the best of the best. If you’re looking at getting a loan or refinancing give them a call. They will take care of you!
-Brandon McBride
“Such a great experience from beginning to end! They are so quick, informative, and helpful. Would definitely recommend and will be using them again in the future!” -Alexis McBride
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Lower Your Monthly Payment with a 15 Year Term

It does not always work that you can refinance into a 15-year loan and drop your monthly payment but sometimes it can happen. With how low interest rates are today it is happening a lot more often.

A recent borrower we worked with is a Veteran who is currently on a tour. He wanted to take advantage of current low rates to do a refinance on his home but thought he would miss out on the opportunity while he was overseas. His coworker who we were helping with a refinance oh his home recommended he give me a call. He was really tough and stand offish when he finally called in but buy after our first initial call, he was awfully glad he called.

After running the numbers, he could not believe that we could lower his payment by $30 a month, save him over $50,000 in interest over the life of the loan and shave 10 years off the loan.

You could say he was happier than a drill sergeant putting new recruits through basic.

I would love to run some numbers for you and see if we can refinance you into a 15-year loan to lower your monthly payment from what you are currently paying and potentially save you thousands in interest charges over the life of your loan.

With interest rates so low right now it is the perfect time to try this refinance option!

 801.206.4343, NMLS # 888979.

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Refinancing into a 15-Year Loan

Are you wanting to cut the down the length of your loan and pay off your home loan faster? With current interest rates being so low now could be the perfect time to refinance into a 15-year loan.

A previous client Marty decided to do just that. Marty planned to retire this year and wanted to look into refinancing so he could pay off his mortgage faster. His plan was to leave his property to his children as inheritance one day.

Marty had been in his current loan for 4 years and had 26 years remaining. He was in an FHA loan with a low rate of 3.5%. However, being in an FHA loan means he is required to pay mortgage insurance for the life of the loan. His payment was $1,500 a month and the total interest and mortgage insurance remaining to be paid over the life of the loan was $187,476.

We were able to refinance Marty into a 15-year loan at 2.999%. This shaved 6 years and $110,000 in interest and mortgage insurance costs off his loan. His payment did increase by $30 a month; but Marty felt this was well worth it to save $110,000 long term.

Refinancing into a shorter loan term is a no brainer and could be the answer you need to save you money in the long run of your loan. There is no reason not to refinance into a 15-year loan, with rates this low it will only benefit you in the end.

Refinancing with Custom Terms:

It does not always work that you can refinance into a 15-year loan and drop your monthly payment, but sometimes it can happen; and with how low interest rates are today it is happening a lot more often.

Another client of ours bought his home in October 2019 at 3.75% rate on a 30-year fixed with a monthly payment of $1,119. For this particular loan, the total interest paid over the life of the loan was to be $134,443. Always looking for a way to save money monthly, he decided to refinance to drop his monthly payment.

After running the numbers, he chose to do a 29-year loan instead of the 30-year term so not to start the loan completely over or reset the mortgage. From there we were able to get him into a new rate of 2.82%, with a new monthly payment of $1,021 and lowered his total interest to $96,376.  The new loan will save the client about $100 each month. His total interest savings will be a little over $38,000.

The client is looking forward to saving month each month as well as saving on accrued interest payments in the long run.

To learn more about what we can do for your loan please send me at email at anthony@alvmortgage.com, or feel free to text or call me at 801-206-4343.

I would love to run some numbers and see if we can refinance you into a 15-year loan or custom term and lower your monthly payment from what you are paying today.

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