Too Refinance or Not to Refinance that is the Question!

Branch NMLS number 33041, Rick Ripma's NMLS number 664589, an equal housing lender, some restrictions apply. Happy Saturday, and thanks so much for joining me today. I appreciate it very much. Today we're going to talk about a variety of things. One of the biggest things I want to talk about is, in this market there ARE reasons to refinance and I want to talk about some of those reasons, because you may be in a situation like that (needing to refinanace), or you may know somebody who is. Before we do that, though, I want to go over something called "by the numbers". This is information that I think is just very interesting. It just gives us a little bit of information about what's happened in the markets. This is published by Michael A. Higley. So for the year of 2021, the S&P gained 28.7% total return. That's the 13th year in the last 25 years that the 42.4 trillion index has returned at least 15% total return for the calendar year. The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value with each stock weighed in the index proportionately to the market value. Long term the S&P has gained an average of 11.1% per year total return, over the last 50 years. The index has been positive 17 out of the last 19 years. And over the long term, the S&P has been up during 40 of the last 50 years, which is 80%

the NASDAQ Composite gained 22.2% total return in 2021. And it's gained 142% total return over the last three years. Bond index: the taxable bond market was down 1.5% in 2021, but has gained 6.9% per year total return over the last 45 years. The bond market is pretty consistent, as you can see. It doesn't have as big of returns. But it tends to be more consistent, over the last 45 years- 1977 to 2021. It's been up the last 45 years, years, was the fourth down year for the bonds in the 45 year, so 41 years out of 45 years it's been up. So it's up most of the time. Not huge gains. I'm telling you this because I think it's important, as we look at interest rates and look at the market, I think it helps when we're looking at what we're going to talk about next, which is refinances. Also, if you have any questions on mortgages, or you want to talk to me about refinancing or purchasing, or just anything mortgage related, please feel free to go to my website hardworkingmortgagguy.com That's hardworkingmortgageguy.com. And from there you can get my email, my phone numbers, and you can contact me via the site-you can put in your information and it will tell me you're wanting to contact me, and I will get back with you as soon as I can. With that, there's small losses in a couple of different bond markets, not any big deal. But really, the whole market was very, very good. Let's talk about the jobless rate; the lowest jobless claims, 3.5%, and the highest 14.7% unemployment rate in the US, since 1970 occurred two months apart in 2020. So in 2020 we had the lowest jobless rate, and two months later we had the highest jobless rate since 1970, and that occurred in the two months in 2020. We all know what caused that. And our jobless rate in November of 2021 was 4.2%. At least that's what's being reported. It's kind of hard because it's about who's looking for a job, and those types of things. So it's not 100%. There are still a lot of jobs out there. But there are a lot of people who have chosen not to work. I think there were an incredible number of people who quit their jobs in November of 2021. So if they aren't looking for job they don't count, if they haven't file unemployment, they don't count, if they quit their jobs they can't file unemployment. New Homes, the median sale price was $416,900 the average sale price was $481,700 of the new homes sold the United States, both reached all time record highs. Because of that the max loan amounts for conventional and FHA both increased significantly. Also, with the new homes, one of the things - you see those numbers, a median price being $416,900 and the average price being $481,700, and you have to understand in the market that we're in, the low price homes, they just aren't there. The high priced homes have now started to sell. So you're seeing much faster turn in the upper prices. The lower prices have always turned faster, there's just not much in the market. So if you're not selling much of the lower (end), and you are selling a lot in the higher end, your median and your average price are going to go up. But that does not mean the affordability has changed. It's just that there's just not enough of the lower homes in the market. And so that's why these went up so high. It's just one of those things that, as you look at that, it just does make a difference. But let's get over to talking about the refinancing and why somebody might want to look at refinancing in this market. You've probably heard a lot ads on the radio recently about mortgage and mortgage rates. It does amaze me, there's one out there that they talk about how you can get under 2% interest rate. And, you know, you have to put 25% down and all that- I don't remember all that statistics. And when you look at it, it's an FHA mortgage, which means you're gonna have mortgage insurance, even if you put 50% down. And it's also, even with that, charging a tremendous amount of points to get to that level. So what I like to do is actually look things, and see what's going to be best. Especially in this market, the last thing you want to do is pay a bunch of points when we're expecting mortgage rates, late this year, to come down. And, you know, we believe they're going to be down in the low threes. So it could be a much better time, if you take a higher rate, have us cover costs, you know, those types of things, you're not out very much money, or any possibly. And then you can refinance later in the year with lower rates. So, most of that's going to be purchases, but it could be refinancing; it does work in this situation, too. A number one reason I'm seeing, and what everybody's advertising right now, is debt consolidation. And there are several reasons for it. Rates are still extremely good. Number two, we have a tremendous amount of equity in our homes. We talked this about last time- 14 to 18% increase in values is what we saw on average, every area is different, but that's what we've seen. That's what they're saying, we think we're still going to be in the high single digits to low double digit and increase in values, appreciation in 2022. With that, it's creating a tremendous amount of equity, where if you have debt, higher payment debt, or higher interest rate debt, it can make a tremendous amount of difference in your life, to refinance that debt and put it into the mortgage. You can pay off your credit cards, possibly you can pay off car loans, pretty much any debt you have, if you have the equity to do it. We can go to an 80% loan to value but again, we have tremendous amount of equity in our homes today. It is a great way to truly affect your life. And I just can't stress it enough. Some people, it's like, well I got a better rate than that. Yes, I understand that. But if you have a lot of debt, and it doesn't even have to be a lot, what we can do can be life changing. It can really make a difference for somebody. So if you are, or you know somebody who's in that situation, it's really worthwhile. So we're going to talk about that. I just made one up and I'm just using a current value of just over $609,000. I just picked a number- the loan amount currently is about $364,000. The equity then is about 245,000. And their current rate is right around 3%. The value stays the same but propose they had about, not quite, $50,000 in additional debt,. Yeah, they had $58,000 in additional debt that we included in their mortgage. It dropped their equity in their house down of course by that $58,000 and the interest rate went up to almost 4%. So the interest rate went up from what it was on their current mortgage. But as you look at that, the first thinkg most people think is, that doesn't make any sense. But it absolutely can make sense. And this is going to explain that. With that change, with everything included, we went to a new loan amount of $424 600, approximately. Now the new payment, with taxes and insurance and the new interest rate, we were looking at about $2,600. And the current payment on the current house, plus installment debt plus revolving debt was almost $4,200. Now, that is a savings of $1,553 a month. That can make a huge difference. And we're going to talk about that here in a second, and some things that we can do. But we'll talk about that after the break. Welcome back, and thank you for joining me, this is Rick Ripma, your hard working mortgage guy, at Advisors Mortgage Group. You can contact me if you have any mortgage questions or want to talk to me about anything mortgage related at hardworkingmortgageguy.com. That's hardworkingmortgageguy.com. From there, you can get all my contact information. And I hope you do. I love talking with everybody and really helping people out as we're talking. Right now we're talking about debt consolidation loans, which is a huge part of the market right now, and can be very, very valuable to anybody who's in a situation, if you have some debt. And we were talking this person I just as a made up, somebody who has quite a bit of equity. And they had $58,000 in credit card debt, and a car loan. And in my made up scenario, I included those payments based on what I see. I mean, this is things that are that are pretty normal. In this case, their payment on the house went up, but their total payment of all debt, once they included it went down by $1,553. So one of the scenarios there is the person can save $1,553 a month, depending on your situation, that can be life changinging, that can take worry out, that can really make a difference. However, there's also other things you can do, you could take that $1,553 and you can apply it towards a mortgage every month to drop the principal down. Now, if you did that, if you made the exact same payments that you are making, total payments including all debt, they would be paying $4,169 a month. Now by adding that $1,553 in savings to the new mortgage, what would that do for somebody? Well, would drop it from a 30 year term to a 12 year eight month term. Now in this case, these people still had almost 26 years remaining. So it takes it from 26 years down to almost 13 years, huge drop half of the time. So one thing, you can save a bunch of money monthly, that can be life changing. You can pay the house off that much sooner. Or let's say you're in some debt, and you're 50 and you want to retire at 65 and you want to pay your house off. That might be something else we can do. I've had some of these that you can pay the house off by the savings in less than six years. This can make a huge difference. So if you have debt, it can be well worth your time to contact me. You know, call me, email me or go to my website, hardworkingmortgageguy.com Get my contact information, contact me and we'll go over your situation. I'll put together a debt consolidation report, it'll show you exactly what the numbers are. It can make your life a lot easier. And that's what this is all about, to make things just that much better for you. And we really, really want to help you with that. So it's just one of those things that if you're in that (situation) or you know anybody that has some debt. It happens to a lot of people, it's just how life is so we don't look down on it. We don't worry about that. How can we help you get out of it and get you back on a path where you're not worried all the time, so that you're not able to sleep at night. So that's the debt consolidation. That's one of the big loans; a lot of people doing that right now. It is very, very popular in this market. Another piece that we're seeing a lot- with the increase in equity, I think the fact that a lot of people have been staying at home rather than working in their office, or they're at least spending more time at home. It's hard to travel. So we spend more time at home. So there's a lot of Home Improvement going on. And there's a lot of people who want to improve their house. They don't want to do it slowly. They want to have somebody come in, do the work and move on. So to do what we call a renovation loan, to renovate your property, can be very beneficial. Now, there's a variety of ways to do that. If you don't have a huge mortgage currently, and you have a tremendous amount of equity, then you can just refinance cash out, or you could add a home equity line of credit, there's options there to take care of it because you don't need an after improve value for the house. You can use the value currently, you can get the money out that you need, because you have plenty of equity. You don't need to do a renovation loan, so we wouldn't look at that. We'd talk about it, and we'd go down a different path. But let's say you don't have the equity in the house that you need to do the improvement. So if you had a home that you just bought. The after improve value we think is going to be in the 320 range to 350 range. They put 20% down, whatever that was. Maybe 180 is what they owed. The value of the house before improvements was going to be in the 250 range. So there wasn't anything there they could do. They tried to do a home equity line of credit with another lender, they couldn't get enough money; not even close to what they needed. This way, we can use the after improve value, because that's what they appraise it for. The appraiser appraisers after we have all the information on what you're going to do to the house and what it's going to cost. And then the appraiser appraises it at that after improve value. When they do that, that gives us a lot more money. So this person was able to get over three times more money by doing it this way. And it made it something that they could do. And that's why this can be so valuable. And then let's say you want to improve the house. You want to put a new kitchen in, you want to add a garage, you want to redo the flooring, a new roof, whatever it is you want to do. In some cases it's a total renovation, tear everything, it's an old house. They want to tear it down, put new plumbing and new electric. You get the bids, you get all that information. Don't get all the bids though, until you talk to me, because we need to run it through a certain way. And then you're able to have an appraisal based on the completion, which normally is considerably higher than what it is before the renovation. At least that's the hope. That's what happens most of the time. So you do that. And then you're able to get the money and do all of those improvements. And just as the debt consolidation can be life changing, this can be a real improvement on your house. As long as you have the equity, and it adds to the value, there's not a limit on what you can do. As long as it meets code and all that, you can add a swimming pool, you could add all kinds of things. So it can something that can be very, very, very helpful if you're looking to improve the home. Now, as a side note on that, you can also do that on a rental property. So let's say some people are now deciding you know what, it's a good time to buy investment properties. You've got to put your money down, but we can still do renovation. When I say money down on on an investment property- you need 25% down, but we can do that based on the after improve value. You can actually buy a house, whether it be a rental property or an investment property or a primary residence, you can buy a house with a renovation loan. So say you find a house that needs work, we can finance it as a renovation loan. So when you close on it, you can get your renovations going. You can have your new kitchen, have your new paint, all new floors, whatever it is that you wanted to do, and move into a house that's exactly or as close to exact as what you wanted it to be. So there are things that this this program can do. Like I said it, can be very beneficial. It's one of those things I would highly recommend that you call me on and we talk about and see if it makes any sense. If you're in that situation, either buying a home that needs renovation and you want to finance in that way, or if you have a home now and you would really like to do these those improvements. In that situation, though, these rates may be a little bit higher, they may not, but they may be. But if you're doing that now, and let's say rates do go down later in the year, we can refinance it. You get the home improvements done and then we go later in the year; it looks like we're gonna have another good year for appreciation, so we refinance it, you just have to have it for six months, and then we can refinance it, and take you out of this mortgage. So it is a great way to make this happen. It's the same thing we can do with a debt consolidation, because the debt consolidation rate is going to be a little higher, because we're doing cash out. Once you get all that done, you're great and get your debts paid off, your credit score increases, that makes a big difference, your insurance should go down....... there's just a lot of things that should happen. And then you should be good to go. So that's kind of the situation that you'd be looking at for a renovation loan. Right now, there can be reasons to to just do a straight refinance. But the reality is for the vast majority of people, it's probably not going to make a lot of sense. I've talked to several people recently where it just didn't make a lot of sense. Or maybe they didn't like the service or on their loan; they didn't like how they were being treated. Well, even then it still has to be worthwhile. And so with the way rates have gone, if you've refinanced in the last two or three years, we probably are going to be at a higher rate, our straight refinance probably wouldn't make sense. However, if it's been a while, if you didn't take advantage of rates when they were very low, this still could be a time to do that. It may or may not, we just have to see what your rate is. I've had people that have been at five, five and a half percent. Now rates are higher, but they're certainly much lower than that and can make a huge difference in lowering the payment. If that's all you need to do, that is a good option. There's all kinds of reasons somebody might not have refinanced by now. But if you think you're in that situation, or you know somebody who is and you believe that you should refinance, we need to talk about it. It may make sense, it may not. We just need to look through your information, and show you how that works and whether it works for you, because it may or may not. Just go to my website, hardworkingmortgageguy.com, all my information is there. You can contact me from there. If you do that, and we talk, we're going to be able to walk through all of that information and make sure that we're giving you the proper information so you can make a decision on if you want to refinance or not. Again, if you refinanced in the last year or two, maybe as long as three, your rates real low, it probably won't make sense. If it's just all you want to do is refinance for a lower rate, it still can make sense if you want to refinance for a shorter term, I've done quite a bit of that lately. So there are still reasons to do it, we just have to look at it and work through it and make sure that we have the information that's needed to give you the proper numbers. One of the last things I want to talk about, and it's in this market, we've talked about right now, we've been talking about refinancing, but you know, there's also a lot of purchases going on. So let's talk a little bit about making the right choice between buying and renting a home. So maybe you or your kids or you know somebody who's thinking maybe they should buy a house. Maybe they should rent, they aren't sure. How can you make that decision? Right now, the real estate market has been extremely strong. And because inventory levels are low, it may be more challenging for you to find a home to purchase. There's no question about that. And that has some people considering renting their next home instead of buying. A lot of people are renting homes now, which is why a lot of people are buying non-owner occupied properties. But if you're one of those people or know somebody who is who's looking at trying to just make that choice, we need to look at the statistics, the numbers behind it to see what makes sense. And there are a few factors to consider before making that decision. Some of the most respected companies like CoreLogic, Case Shiller, Blacknight, MBS Highways and others, forecast that real estate values are expected to appreciate into the foreseeable future. They're looking at prices increasing this year. As I said, most people are thinking somewhere around 10% give or take, that's where they're looking at it. They're also expecting the rents to continue to rise by more than 5% a year. So they're expecting rents to rise by more than 5% a year, which is much more than a mortgage payment rises. Because when a mortgage raises, even when the interest rate goes up, or when taxes do, it doesn't rise by 5%. Generally it just rises by a few $100's or $100. It's usually much less than 5%. And that 5% increase in rents can be significant. The other thing is that owning a home can create significant wealth for your family, I don't remember the exact number; I have gone over it before. The difference between a renter and a homeowner- theaverage is like $300, $400,000 in and assets, from somebody who just rented to somebody who owned the property. The homeowner is that much better off. Additionally, your mortgage will amortize, which means that a portion of each payment is going towards paying that balance down. So you're paying the balance down, your your house is increasing in value, which is building equity and wealth for you. You know, this is different than a rental payment, which builds wealth for the landlord really, that's just what it does. Another big consideration is a level of freedom to do things to your home as an owner, which may be limited as a tenant. So, if you want to paint, you want to add shelving, you want to do certain things to the property. As a homeowner, it's your property, inside you can pretty much do whatever you want. Outside within the neighborhood restrictions and area restrictions. You do have to play within those rules, but you can pretty much do, within reason, what you want to do to the property. So as you're looking at making this decision between buying and renting, I have the ability to provide you with a detailed analysis with a forecast of your specific market. So if you know where you're buying, I can take that market by county and get that information to you. If you contact me to see why homeownership is probably a better option to create wealththan renting, just go to my website, hardworkingmortgageguy.com That's hardworkingmortgageguy.com. And you can fill out the information or you can just pull my my information off the site, give me a call or send me an email, and we can talk about it. We can put together the information. I just need the basics for what you're trying to do. Again, this could be for you, it could be for somebody you know. It could be for kids, your friends, family, whoever could be in that market where they're trying to make that decision. And I understand right now it can be discouraging, trying to get a house, because it is a very, very tight market, in the lower price range. If somebody is in that, it is hard to get. I do a first time homebuyer seminar. And I can tell you I found a tremendous amount of people who did not think they were set up for buying a house. They're probably like me. On most things I'm very, very optimistic, but on things like buying a house or buying a car, things like that, I'm always kind of pessimistic on it and think..... you don't want to be turned down and you don't want to apply to somebody and have them say no. So people don't want to do that. But a lot of times you're selling yourself short and will qualify. They do qualify. And they should talk to somebody so go to hardworkingmortgageguy.com contact me and we can talk about it. And we can get you the information. And I appreciate very much you joining me today. I hope you have a great weekend.