Vacation Home Loans

2005-08-22T17:41:00.000-05:00

With a GREAT mountain view!

2005-08-22T17:39:00.000-05:00

Lakeside home in Conway, NH

Last Week in Review

2005-05-01T09:36:00.000-05:00

THAT TERRIBLE “GASSY” FEELING…You know the one. You fill up the tank, and uneasily mull over the fact that you just spent enough to have bought a week’s worth of enchilada dinners…including the bean dip. But help is on the way – did you know that oil finally went back under $50 a barrel for the first time in over two months? Not just good news at the gas pump, its also very good news for business and Stocks. Investors chased the hot action in Stocks by selling off Bonds, pressuring home loan rates to trend slightly higher late in the week.

And the news and economic reports of last week had already been very mixed, sending some conflicting signals about the pace of inflation and the overall strength of the US economy. Bonds were shaken but not stirred as they absorbed a slate of reports that unfortunately did not provide a clear picture as to where the trend on growth and inflation may go from here. Home loan rates bumped around and had improved just slightly with the news midweek, but ended largely unchanged overall.

DID YOU LEND YOUR GOOD FRIENDS AT THE IRS A FEW THOUSAND DOLLARS THIS YEAR…INTEREST FREE? YOU DIDN’T NEED TO…AND UNCLE SAM PROBABLY WOULDN’T DO THE SAME FOR YOU.

Forecast For The Week

So since last week ended up being an unsatisfying combo platter of good and bad news for the economy…what are the hot topics going to be for the week ahead?

First, another Fed meeting is on the slate for Tuesday morning. It is highly expected that the Fed will once again hike the Fed Funds rate by .25%. Remember that this is a short-term rate, which impacts credit cards, credit lines, auto loans and the like. Now in times past, home loan rates would actually decline slightly when the Fed would decide to hike the Fed Funds rate, as they are doing so to combat inflation, the arch-enemy of Bonds and home loan rates. But in recent days, the Fed has clearly broadcast what their moves are likely to be…and so the anticipated .25% hike has already been built into the market. Only a surprise hike of .50% or a change in the wording of the policy statement is likely to cause a major reaction for Bonds and home loan rates.

Traders are also looking ahead to next Friday’s big Jobs Report, which is usually a market mover. Last month’s number came in at 110,000, which was lower than analysts were expecting…so what will this month’s number hold in store? The hope is to hear that 170,000 new jobs were created during April, but we’ll all have to wait and see. Remember that positive economic news, like strong job growth, is bad news for Bonds and home loan rates – whereas a disappointing report, like weak job growth, will help Bonds and home loan rates improve.

Bond prices have traded in a fairly tight range lately, and home loan rates have been mostly stable. But this week’s news desk is loaded for bear…and the flavor of that news will dictate if home loan rates can hold their ground or bust a move.

The Mortgage Market View…

YOU’VE GOT MAIL! The local letter carrier is certainly very popular during this time of year, and many people are anxiously checking their mailbox. What are they all waiting for? It sure isn’t their most recent VISA statement or electric bill. It’s that juicy tax refund!

People just can’t wait to get their hands on that check – and they probably have exact plans on how they will spend it. But isn’t there a better way to get your money faster than tackling the letter carrier?

Sure, many individuals who are expecting refund checks have discovered services that give them an advance on their money. While this service will give you the cash right at the time of filing, the fees involved can take a hefty chunk out of your refund. So what’s a tax payer to do?

The IRS can actually help.

When you think about it, getting a refund check means that you let the IRS use your money throughout the year without paying you any interest. Wouldn’t you rather have the money during the year yourself? Here’s how you do it. The IRS allows you to increase the number of dependants on your W-4 withholding form, meaning that less will be withheld for taxes from each paycheck. In the past, if you claimed greater than nine dependants, an explanation and approval may have been required. But the IRS has lifted this restriction, allowing you to voluntarily increase your dependants claimed. This lets you have more money in each paycheck instead of “loaning” the money to the IRS and having to wait for a refund.

But let’s not go overboard…you should only lessen the periodic tax withholding to match the expected refund. This way you are taking your refund as you go, instead of letting the IRS hold on to it. There is even a nifty calculator the IRS has provided for free, which lets you see how a change in withholding will affect your paycheck.

Here’s the link to the free withholding calculator: IRS Bean Counter http://www.irs.gov/individuals/article/0,,id=96196,00.html

And managing your withholding can be a great tool if you are currently renting, but are about to buy a home. The new housing expense may be greater than the rent payments, but the new home will give you some important tax deductions. By adjusting your withholding when you buy a home, you can get the benefit of the new home deductions spread into each paycheck…which can make that new home payment a lot more comfortable.

Before you make any changes, you want to be sure you are balancing the amounts carefully and correctly, so it is always a good idea to check with your tax professional.

The Week's Economic Indicator Calendar

Here comes another week of high-impact economic reports and events that will keep Bond Traders on their game, including Tuesday’s Federal Reserve FOMC Policy Statement and Friday’s big Employment Report.

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Boomers Banking on Second Homes

2005-05-01T09:00:00.000-05:00

Baby boomers aren't moving down to smaller homes and they aren't moving out to retirement homes, likely because their current homes are sufficient or they have the option to move into another home they own.

Even before the National Association of Realtors' "2005 National Association of Realtors Profile of Second-Home Buyers" revealed the second home market accounts for 38 percent of the existing housing stock and 36 percent of all homes purchased in 2004, Long Beach Island, NJ-based Hansen Realty found that nearly two thirds of baby boomers own two or more homes.

Conducted by Stamford, CT-based market research firm InsightExpress, the survey queried online more than 1,500 consumers, age 50 and older on their opinions toward real estate and the home buying and selling process.

The survey's results indicate that boomers' penchant for second homes gives them retirement housing options that were likely less available to previous generations.

The survey found:

Nine out of 10 boomers have owned at least one home in their lifetime, while nearly two-thirds have owned two or more homes.

Most boomers, 53 percent, have lived in their current residence for 10 or more years, at least twice as long as the 5 to 7 years younger home owners stay put.

Most boomers, 57 percent, prefer to stay within 50 miles of their family during their next move, while only 16 percent would consider moving 1,000 miles or more.

Only 8 percent of those considering a move in the next five years indicated that they might consider purchasing a home in an active adult community.

The average senior lives in a house with three or more bedrooms and two or more baths, but only 11 percent felt their current home is too big, while 25 percent of respondents thought their home was too small. Satisfaction with the size of their current home indicates there's less chance a boomer will move down to a smaller home.

Should they move, they likely would move to a larger home because more than 61 percent consider purchasing a single-family home but most don't think their current home is too big.

Respondents cited better home or living conditions as the second most popular reason for buying a new residence.

"These survey results show that as more and more baby boomers turn 50, it is becoming harder to define the increasingly diverse mature consumer," said Kevin Farnung, REALTOR, Hansen Realty.

It was once believed that the typical aging home owner would eventually move to an active adult community and downsize, but more and more surveys show otherwise.

Baby boomers, Americans born between 1946 and 1964 and are now aged 40 to 58, represent a population bulge of 75 million people who are redefining the second half of life. AARP estimates that 70 percent of those 45 and older plan to continue working in their "retirement" years and AARP's "Fixing To Stay Put" study likewise says 71 percent of Americans aged 45 and over plan to stay in their own homes when they retire.

Vacation Home Loans

2005-04-30T10:54:00.000-05:00

Vacation Home Loans

Rate Shopping

2005-04-30T10:45:00.000-05:00

SHOPPING AROUND?

Here’s the inside scoop on how to do it right.

Make sure you are working with an experienced, professional loan officer. The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly or troubleshooting issues that may arise along the way. But how can you tell who is a true professional?

Here are four simple questions a professional lender absolutely must know the answers to. If they do not know the answers, run—don’t walk—to a lender who does.

1) What are mortgage interest rates based on?
The only correct answer is “Mortgage Backed Securities” or “Mortgage Bonds,” not the 10-year Treasury Note. While the 10-year T-Note sometimes “trends” in the same direction as Mortgage Bonds, it is not unusual to see them move in opposite directions. Do not work with a lender who has their eyes on the wrong indicators.

2) What is the next economic report or event that could cause interest-rate movement?
Economic events such as the release of the monthly Jobs Report and Consumer Price Index can cause interest rates to change dramatically. A professional lender will have this information at their fingertips. For an up-to-date calendar of weekly economic reports and events that may cause rates to fluctuate, email me at dcallan@ameradmortgage.com.

3) When Greenspan and the Fed “change rates,” what does this mean, and what impact does this have on mortgage interest rates?
The answer may surprise you. The Fed can only control two rates, the “Fed Funds Rate” and the “Discount Rate.” Both are very short-term rates that impact credit cards, credit lines, auto loans and the like. Mortgage rates most often will actually move in the opposite direction as the Fed change. In the example of a Fed rate hike, raising the “Fed Funds Rate” helps to combat inflation, which is a Bond’s worst enemy, as inflation erodes the future fixed value of that Bond. So a Fed rate hike is actually good for Bonds, and mortgage rates will typically respond positively.

4) What's happening in the market today, and what do you see in the near future?
If a lender cannot answer how Mortgage Bonds and interest rates are moving “live” – in real time – or explain what is coming up in the near future that could impact rates, you are talking with someone who is still reading last week’s newspaper, and probably not a professional with whom to entrust your home mortgage financing. Would you work with a stockbroker who was only able to reference yesterday’s paper to tell you how a stock traded, but has no idea what the movement looks like at the present time or which market conditions could cause changes in the near future? No way.

Be smart. Ask questions. Get answers. More than likely, this is one of the largest and most important financial transactions you will ever make. You might do this only four or five times in your entire life…but I do this every single day. It’s your home and your future. It’s my profession and my passion.

I am ready to work for your best interest.

Devon Callan
American Advantage Mortgage Company

Not Just for First Time Home Buyers Anymore

2005-04-24T10:12:00.000-05:00

Back in early February, I assisted in the negotiation of a revolutionary new residential mortgage product which enables 100% financing of a primary, secondary, or investment property up to $1 million dollars.

Snippets from my press release announcing the same are as follows:

“In today’s real estate market, many people envision low-down-payment programs for first time homebuyers,” states Devon Callan, Loan Officer at American Advantage Mortgage Company. “However, if the after-tax return on alternative uses of that money exceeds the buyers financing costs, putting little or no money down on a home is often a wise financial choice.” He added that funding 100% of a primary, secondary, or investment property helps avoid liquidating assets to cover a down payment and possibly paying capital gains after liquidating. “Naturally, one would want to consult their tax advisor about their personal situation,” said Callan, “however this innovative financing strategy offers several paybacks, especially for property investors.”

When asked about the benefits, Callan explained, “Financing 100% of your primary, secondary, or investment property may increase the amount of deductible interest expense as well as defer potential capital gains exposure.” Another reason for 100% financing Callan stated was investment strategy preservation which allows the homebuyer to keep their portfolio intact by avoiding liquidation of assets to fund a down payment. “With the maximum loan amount of $1 million dollars, 100% financing is not for first-time homebuyers anymore,” laughed Callan. The new mortgage product allows various property types including single family, multiple family, townhouses, and condos.

About American Advantage Mortgage Company, Inc.
American Advantage Mortgage Company is based out of Forked River, New Jersey and is a licensed mortgage banker in NJ, SC, FL, and CO.

2005-04-22T12:33:00.000-05:00

The white sands of Long Beach Island, New Jersey

Put Your Equity to Work

2005-04-22T11:04:00.000-05:00

Your Equity Can Equal Extra Income

I am beginning to see a trend among among my sophisticated clients. People today are not merely refinancing to reduce monthly payments with current historically low rates; they are cashing out large amounts of equity from their homes to purchase second homes or investment properties on Long Beach Island, New Jersey.

One client refinanced, taking $700,000 cash out of his Princeton home to build a $2,800,000 home in Barnegat Light with a market value of $4,000,000. Another borrower cashed out $615,000 of his home to invest in a condominium community in Holgate. Still again, an Englishman tapped $1,000,000 in equity from his Loveladies retreat saying, “that equity earns no return.”

Here is a hypothetical of two homeowners in identical situations:

Client A has a $1,500,000 home with a $750,000 mortgage at 6.00% and refinances to a 1.95% ARM. The new payment of $2,754 saves our client $1,742 monthly, or $20,904 in year one.

Client B has an identical home and mortgage, but wisely cashes out $250,000 with a new $1,000,000 mortgage at 1.95%. Even though our client accessed $250,000 in equity, his new payment of $3,672 saves him $824 per month or $9,888 in year one. With the $250,000 cash, he purchases two vacation homes in Beach Haven; each valued at $625,000, which rent for eighteen weeks at $2,400 per week, generating an annual income of $43,200 per home.

The mortgage payment on each vacation home is $1,836 ($500,000 financed at 1.95%), totaling $22,032 annually per home. The rental income covers the mortgage, taxes, insurance, and management. But, the wealth is created through appreciation.

Many resort properties are appreciating at 15% per year. But, assuming an average 9% appreciation on these two $625,000 homes, they are worth $978,000 with approximately $350,000 equity in each, or $700,000 total. This $250,000 investment growing to $700,000 in 5 years is an average annual rate of return of 20.77%.

With positive rental income, Client B leveraged the lazy, unproductive equity in his home with two wealth creating properties.

Put your home’s equity to work - vacations shouldn’t cost you money; they should make money for you.

Email me for a cash flow analysis worksheet to evaluate your next purchase and then call your Realtor.