10 Mar 2023
By Kevin Gahagan

Why Should You Consider Getting An Adjustable Rate Mortgage?

Mortgage

Why Should You Consider Getting An Adjustable Rate Mortgage?If you are planning on buying a house in the near future, you have probably seen that there are multiple options available. You might even be considering an adjustable-rate mortgage, usually shortened to ARM. While many people opt for a fixed-rate mortgage, there are a few reasons to consider an ARM as well. What are some of the top advantages to keep in mind?

A Lower Initial Payment

One of the biggest reasons why many home buyers consider an adjustable-rate mortgage is that you get a lower initial payment. Often, the ARM’s interest rate is lower than the fixed-rate interest rate at the time of signing. This means that you might have more flexibility at the beginning of the amortization schedule, freeing up more cash. You can use that cash to handle renovations and repairs if your house requires them.

You Can Pay Down Your Principle Faster

Because the interest rate is lower at the beginning of the payment cycle, you might be able to use that extra cash to pay down the principle faster. This could allow you to pay off the house earlier, or it might mean that you end up paying less interest over the life of the loan because you can shrink the principle faster.

You Can Always Refinance Later

While many home buyers are concerned that an adjustable-rate mortgage might increase after the fixed period ends, you do not necessarily have to stick with the ARM forever. For example, you might decide that you want to refinance the house down the road to a lower interest rate, creating opportunities to save money. You might even end up selling the house and moving before the fixed period ends, giving you an opportunity to reset your loan.

Consider Getting an Adjustable-Rate Mortgage

These are a few of the top reasons why you might want to consider an adjustable-rate mortgage. Like anything else, ARMs have their benefits and drawbacks, and the right option for one person might not be the right option for you. You should think carefully about your specific situation, consider all of the options available, and select the best choice for your needs. Do not hesitate to reach out to an expert who can help you.

31 Jan 2023
By Kevin Gahagan

What You Need To Know About A Closed-End Second Mortgage

Mortgage

What You Need To Know About A Closed-End Second Mortgage

A home is probably one of the most expensive purchases you will ever make. It is important for you to understand all of the options available to you, particularly if you need a quick source of cash, and you might be thinking about taking out a second mortgage. You can use a closed-end second mortgage to cover the cost of repairs, medical debt, and even consolidate your other sources of debt. How do you know if this option is right for you?

An Overview Of A Closed-End Second Mortgage

If you decide to take out a second mortgage, you will typically withdraw the cash you need. Then, if you need more cash in the future, you can take out more down the road. In contrast, with a closed-end second mortgage, you will receive the entire loan amount upfront. Then, you will not be able to withdraw any additional cash if you need more because you have already withdrawn the maximum limit. Generally, you can withdraw up to 80 percent of your home’s equity value, but there are many factors that will dictate your limit.

The Pros

Before deciding whether this is the right option for you, you must weigh the benefits and drawbacks. The biggest benefit is that it gives you access to a quick, large, lump sum payment. You can use this to cover home renovations and pay off debt. You also get access to a fixed interest rate. Unlike other options, you don’t have to worry about the interest rate changing.

The Cons

On the other hand, there are some drawbacks you might notice. You have to use your home as collateral, so you risk losing your home if you can’t meet the payments. In addition, you will probably incur higher closing expenses, and you may have to pay a higher interest rate. This is particularly true if you are taking out a large amount of money.

Weigh Your Options Carefully Before Deciding On A Second Mortgage

If you are looking for a second mortgage, you need to think about all of your options carefully before you decide which one is right for your needs. Consider reaching out to an expert who can help you.

16 Aug 2022
By Kevin Gahagan

What To Know About a 40-Year Mortgage

Mortgage

What To Know About a 40-Year MortgageIf you take a look at your mortgage options, you might find an option for a 40-year mortgage. Now, most lenders do not offer this as an option, but if you find yourself struggling to keep up with your mortgage payments, the lender may offer to restructure your loan into a 40-year term. Is this a smart move, and what do you need to know about this choice?

Your Monthly Payments Get Smaller

One of the top benefits of restructuring your loan to a 40-year term is that you shrink your monthly payments. By spreading out the loan over 40 years instead of 30 or 15, you don’t need to pay as much money every month. If you are struggling to keep up with your payments, you can make them smaller without falling behind by going with a 40-year mortgage.

You Free Up Cash

Another benefit of a 40-year mortgage is that you can free up some cash. This is cash that you can use to pay off other debts, save for retirement, or invest in other areas. Because you won’t owe as much money every month, you will have more money to play with, which can ease your financial burdens.

You Pay More Interest And Slow Your Equity Buildup

On the other hand, you need to think about the downsides of a 40-year mortgage as well. If you increase your payments to 40 years, you will pay more money in interest overall. In addition, you will slow the rate at which you build equity, which means that you might not walk away with as much cash when you sell the house. You need to balance these risks with the benefits of a 40-year loan.

Think Carefully About Your Loan Options

In the end, a 40-year mortgage is not always a smart move, but if the alternative is foreclosure, it is something to consider. While this type of mortgage can help you reduce your monthly payments, it could also increase the total interest you pay while slowing the rate at which you build equity. You should talk to a professional to ensure you consider all of your options before you decide if this is the right move for you.

17 Jun 2021
By Kevin Gahagan

Is an ARM Loan Right for You?

Mortgage

Is an ARM right for youIn today’s competitive housing industry, it’s important to find the loan that’s right for you. With the low-interest-rate environment, many buyers wonder if an ARM loan is the best choice. Here’s everything you should consider before choosing an ARM loan.

Understanding how an ARM Loan Works

An ARM loan offers an introductory rate. The rate remains fixed for the first few years. After the fixed period, the rate adjusts annually based on the index (such as LIBOR) and the chosen margin set by the lender.

Many buyers prefer the ARM because the initial payment is much lower so they can afford a larger loan. With the potential of increasing rates in the near future, many buyers are looking at the ARM for its lower cost. 

A fixed-rate loan, on the other hand, starts at one rate and remains the same. Your payment never changes unless you escrow your taxes and insurance, and those rates change throughout the time you own the home. 

Pros and Cons of the ARM Loan

 Pros:

  • Lower payment for the first few years
  • You may be able to pay more principal each month with the lower payment
  • Rates may decrease in the future

Cons:

  • Rates can increase significantly
  • Your monthly payment will change annually after the fixed period
  • It’s hard to predict your financial situation 5 to 10 years from now

Choosing Between an ARM Loan and Fixed Rate Loan

Because you don’t know where you’ll be 5 to 10 years from now, it’s hard to decide if an ARM loan or fixed-rate loan is right. Here’s what you should consider.

Will you Move Soon?

Think about your plans. Will you move in the next few years? If so, an ARM may make sense, especially if you can get one with a rate that will adjust after you sell the house.

Do you Think you’ll Refinance? 

Some people like refinancing whether to get the lowest rates or to tap into their home’s equity. If you’ve structured your loan so that you put money into the home now but will tap into it later, an ARM may save you money for a few years. If you refinance before the rate adjusts, you eliminate the risk of increasing rates. 

Do you not Like Risks?

No matter what your future plans may be, if you don’t like risks and uncertainty, a fixed-rate loan is a better choice. You’ll get more predictability and know exactly what your payment is each month. You’ll also know when you can afford to pay more principal and pay your loan down faster.

Choose the Right Loan Term for You

Look at your situation and choose the loan term that suits your finances now and in the future. Even if everyone around you is taking an ARM loan doesn’t mean it’s right for you. Know the terms, how much the rate can change, and what you are comfortable affording.

Talk with your loan officer and look at all scenarios, paying close attention to the loan’s total cost over the life of the loan before deciding.

07 Apr 2021
By Kevin Gahagan

VA vs FHA vs USDA What’s the Difference?

Mortgage

VA vs FHA vs USDA What's the Difference?You may have more options than you think when it comes to securing a mortgage for your new home. While many buyers opt for conventional financing, another option or program might be a better choice for you, depending on your personal and financial situation. Learning more about FHA, USDA, and VA loans ensures you get the best possible deal for your mortgage and that you secure the loan that you need for your new home. Here’s what you need to know about these useful mortgage options.

FHA Loans
These are traditional mortgages that are backed by the FHA: when you take out an FHA loan, this government agency is insuring the loan. This makes your loan more appealing to lenders who might otherwise feel your credit or income history is not strong enough. An FHA loan is available to a wide range of buyers and price points and offers a low-down payment, reasonable interest, and other perks that make it worth exploring for your next mortgage. 

VA Loans
If you are a veteran then this program, which offers loans insured by the VA, is a great option for you as they do not require money down so you can buy immediately, rather than saving for years for a down payment. The VA loan is available to those who have served or are serving in the armed forces and is a good option to help you get the home you want with no money down, unlike a conventional mortgage loan.

USDA Loans
One of the most useful and often overlooked loan programs is from the USDA. While this government office offers direct loans, far more people qualify for their insured loan programs. USDA loans are for rural areas, but a surprising number of suburban communities and locations qualify as well. With a low-down payment and interest, this subsidized loan program is well worth it if you plan to live in a rural or suburban area. 

Not every borrower will qualify for the mortgage options above; the USDA has guidelines on income and the home you are interested in. The FHA does not have income requirements, but you will need to prove your income and this option also has a loan limit.  If you do meet the guidelines of any of the above programs, they can help you access the home you want by dramatically reducing your upfront and deposit costs. 

The right loan for you will depend on your income, credit, and the home you’ve selected. Your agent can help you find the home that suits the program you want and make it easy for you to secure the financing you qualify for. Get in touch today to talk about your home buying options and see which loan option is right for you.