HELOCs Becoming More Expensive


In September, the Federal Reserve raised interest rates for the third time in 2018 and they’re expected to go up one more time this year and three times next year. If you have a Home Equity Line of Credit, HELOC, you’re paying more to use that money and it is going to become more expensive.

It may make sense to refinance your home and consolidate the balance of your HELOC to lock in a lower mortgage rate. Most lenders require that the combination of these loans should not exceed 80% of the home’s fair market value and that you have good credit and adequate income to support the payment.

A HELOC is a first or second mortgage that allows the borrower to withdraw money as needed, up to the line of credit provided by the lender. A draw period is established where the borrower is only required to pay interest.

Since all HELOC loans are variable rate mortgages, during periods of rising rates, the cost of the funds increase. However, unlike adjustable rate mortgages that have specified adjustment periods and caps, a HELOC adjusts when the prime interest changes.

The formula for determining available funds on a refinance are to take 80% of the fair market value, which will probably have to be verified by appraisal, less the existing first mortgage and the costs to refinance. The balance would need to cover the cost of replacing the HELOC. Any remaining balance may be available for cash to be taken out.

Now is a great time for a mortgage review.In many cases, the equity you have in your home may allow you to eliminate mortgage insurance and substantially lower your monthly payment.As with all tax matters, always consult with a tax professional before making any decisions.Call us at (503) 289-4970 for a recommendation of a trusted mortgage professional.

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Fast Track Rental Property


FHA allows owner-occupants to purchase up to a four-unit property with a minimum 3.5% down payment. The rent collected on three units could be used to make the payment and the owners’ pro-rata share would be less than ¼ of the payment itself.

The owner-occupied unit would be considered their principal residence. The other three units are treated as rental property and eligible for cost recovery, a non-cash deduction plus all the normal business expenses. The rental income of the three remaining units is calculated as income and assists the buyer in qualifying.

A homeowner could buy a four-unit, live in one for two years, buy another four-unit with a minimum down payment, move into one unit, rent the other three as well as the previous unit in the first property. Then, after another two years, repeat the same process over again.

The fifth year, the homeowner/investor would have a total of 11 rental units plus the one that they are occupying. An acquisition strategy like this might be difficult for a family with children and a single person or couple might find it easier to move more frequently.

As the equity increases in these properties, due to appreciation and amortization, the money could be pulled out through refinancing to purchase additional income properties. Another objective might be to pay the mortgage off as soon as possible and any cash flow after tax could be applied directly to the principal.

FHA has a nationwide mortgage limit for a four-unit of $521,250 but some high-cost areas have been designated with increased limits. There are also loan programs for two and three-unit properties with limits of $347,000 and $419,425 with similar exceptions for high-cost areas.

The low mortgage rate and minimal down payments for owner-occupied FHA mortgages makes this strategy attractive because it gives investors an opportunity to highly leverage their investment. Most non-owner-occupied (investor) mortgages would require 20-25% down payment and have a slightly higher interest rate than for an owner-occupant.

To learn more about this opportunity, call (503) 289-4970 and we can give you information on specifics in a variety of areas.

Land of the Free: Don’t let bad credit stop you


Ask Carolyn Warren

As we celebrate living in the Land of the Free and Home of the Brave, it occurred to me that being strapped with bad credit is the opposite of freedom. When you can’t enjoy life because you’ve got creditors hounding you to pay bills, that is not freedom. When you can’t get a decent interest rate on a car loan or decent insurance premiums because of a low credit score, that is not fun.

I urge you to take control of your credit and finances. No matter where you are today, you can make a plan for your future. It might not happen overnight, it might take some self-discipline, and some work — but that is what our legacy is all about.

Our forefathers and foremothers — all of them, not matter where they came from, whether rich or poor — wanted to be free. Let’s grab hold of that…

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Credit News for U.S. Veterans!


Ask Carolyn Warren

New credit leniency and protections for our highly respected U.S. Veterans have been signed into law. Here are the important points to know:

  • Medical debts/collections incurred cannot be reported to a veteran’s credit report for one full year from the time the medical service was provided.
  • If any medical debt has been reported as delinquent, a collection, or a charge-off, it must be removed from the veterans credit report once it has been satisfied.
  • If a medical debt is in the process of being paid by the VA, and the Veteran provides the proper documentation to the credit bureaus, it must be removed from their credit report.
  • Veterans on active duty are to receive free credit monitoring that will alert them to any material changes on their credit reports.

Thanks to the Economic Growth, Regulatory Relief and Consumer Protection Act initiated by Senator Mike Crapo (R-ID) and signed…

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Mortgage Free


It may be an all too common belief that a person will have a house payment and a car payment for the rest of their lives. However, with a plan and some determination, you can be mortgage free.

Planning for retirement is obviously important and many times, an activity plagued by procrastination. Some homeowners’ goal is to have their home paid for by retirement, so they won’t have payments. It makes sense to eliminate a sizable recurring expense before they quit working.

By making regular principal contributions in addition to the payments, the debt can be eliminated by the target retirement date.

Assume a homeowner refinanced their $300,000 mortgage at 4% last year for 30 years with the first payment due on May 1, 2017. With normal amortization, the home will be paid for at the end of the term.

Additional principal contributions with each payment will save interest, build equity and of course, accelerate the payoff on the home. An extra $250.00 a month would pay off the mortgage 7.5 years sooner. $786.81 extra with each payment would pay off the loan in 15 years.

Having a home paid for at retirement has the apparent benefit of no house payment. A debt-free home is also a substantial asset that could be borrowed against or sold if unanticipated events should occur.

To make some projections to pay off your own mortgage, use this use the Equity Accelerator calculator.

How to Clean Gutters


The gutters and downspouts on your home are intended to channel rainwater away from your home and its foundation. When they’re blocked and not functioning properly they can lead to the gutters coming loose, wood rot and mildew, staining of painted surfaces, and even worse, foundation issues or water penetration into the interior of the home.

Most experts recommend cleaning the gutters at least once a year. More often might be necessary depending on the proximity of leaves and other debris that could collect.

If this is a task that you feel comfortable about tackling yourself, there are few things to consider. If the debris is dry, it will be easier to clean the gutters. Safety is important, and precautions should be taken such as using a sturdy ladder and possibly, having someone hold it while you’re on the ladder.

Other useful tools will be a five-gallon plastic bucket to hook on the ladder to hold the debris; work gloves to protect your hands from sharp edges of the gutters; a trowel or scoop and a garden hose with a nozzle.

· Start by placing the ladder near a downspout for the section of gutter to be cleaned.

· Remove large debris and put it into the empty bucket. Work away from the downspout toward the other end.

· When you’re at the end of the gutter, using the water hose and nozzle, spray out the gutter so it will drain to the downspout.

· If the water doesn’t drain easily, the downspout could be blocked. Accessing the spout from the bottom with either the hose with nozzle or a plumber’s snake, try to dislodge the blockage.

· Reattach or tighten any pieces that were removed or loosened while working on the downspout.

· Flush the gutters a final time, working from the opposite end, as before, toward the downspout.

There are specialized tools at the home improvement stores like Lowes and Home Depot that can make this job easier. Check out their websites and search for “gutter cleaning”.

Consumer Protection from Irresponsible Mortgage Practices


Congress enacted the Dodd-Frank Act in 2010 in response to the mortgage crisis that led to America’s Great Recession. The two parts that apply closely to homebuyers are the Ability-to-Repay (ATR) and Qualified Mortgages (QM).

A Qualified Mortgage is a category of loans that have certain, more stable features that help make it more likely that borrowers will be able to afford their loan. These loans do not allow certain risky features like an interest-only period when no money is applied to reduce the principal; negative amortization that would allow the mortgage balance to increase; and, “balloon payments” at the end of the loan that are larger than the normal periodic payments.

A debt-to-income ratio of less than or equal to 43% has been established to provide a limit on how much of a borrower’s income can go toward total debt including the mortgage and all other monthly debt payments. However, the Consumer Finance Protection Bureau believes these loans should be evaluated on a case-by-case basis and in some cases, can exceed 43%.

There is a limit for up-front points and fees the lender can charge.

By showing that the lender made an effort to be certain that the borrower has the ability to repay the loan, the lender in turn, receives certain legal protections. Underwriting factors considered by the lender include:

  1. current or reasonably expected income or assets
  2. current employment status
  3. the monthly payment on the covered transaction
  4. the monthly payment on any simultaneous loan
  5. the monthly payment for mortgage-related obligations
  6. current debt obligations, alimony, and child support
  7. the monthly debt-to-income ratio or residual income
  8. credit history

For more information, see the Consumer Financial Protection Bureau fact sheet … protecting consumers from irresponsible mortgage lending.