Why Your Refinance Bubble Might Burst

If you have been following the home finance sector, it wouldn’t come as a surprise that mortgage rates are heading north. The climb is gradual but sure footed, making long term homeowners reconsider their financing strategy. Most of them are opting for refinance since it offers significant savings and lowers the burden of monthly payments. However, some homeowners haven’t been able to get their refinance application approved. If you are one such disappointed homeowner or find yourself the verge of applying for refinance, please read the following:

You Have Not-Too-Impressive Credit History

This is an open secret—lenders want to lower their exposure to risk. So they prefer people with solid credit histories. Mortgage lending follows this tradition too. A credit score defines your ability to pay back in the long term. Credit score expectations might be relaxed for the usual, purchase loans, but the housing sector is a different game all together. Your credit scoring is also affected by your choice of refinance, i.e. a VA or an FHA loan. Some loan programs are very strict about the credit score while some don’t think of such scores as a serious eligibility condition. However, the lenders, the folks who actually issue the loans are always on the lookout for better credit profiles.

You Have Over-compromised Your Home’s Value

If you owe much more than the current market worth of your house, a lender is less likely to offer you a mortgage—this is totally relevant for traditional lenders. They don’t refinance homes that are supposedly under the water. Recently, the government introduced some unique refinance schemes for distressed homeowners. However, such programs are numbered. They might not be available in your state. Still, it is better to check through popular refinance programs, like the HARP—Home Affordable Refinance Program. Homeowners can apply for refinancing their Freddie Mac and Fannie Mae loans here.

You Have Substantial Mortgage Insurance

Mortgage insurance continues to test the conventional mortgaging wisdom. Traditional lenders treat it as an additional liability. This is more relevant if the insurance is being paid by the mortgaging firm. More issues persist if the federal government’s HARP program mortgage is involved. The restrictions might have been relaxed by some lenders, but overall mortgage insurance presents a major deterrent to refinancing.

You Don’t Earn Enough

Yes, the economy is progressing, but salaries are still under stress. A recovery is in motion as businesses are hiring more, but the packages on offer, even for experienced and skilled workers, aren’t very inspiring. So, be guarded in how you spend. Not earning enough and paying through a pile of bills can damage your evaluation for a refinance. Lenders too are recovering from the hammering of the economic downturn. Mortgage providers are digging deeper into borrower profiles. Weekend jobs or any type of supplementary income can also work in your favor. Even a handful of mortgage non-payments can work against you.

You Have Jumbo Liabilities

Homebuyers who have spent a fortune on their new residences are at a bigger risk of not qualifying for refinance. Big-property owners often take jumbo loans. These aren’t the safest bet in the lending industry. The slightest indication of a downswing in property rates in the neighborhood can leave such homeowners without any conviction for a refinance.

Creative Ways to Use Your Basement

A full basement foundation may be quite expensive, but it is well-worth the money you spend on it. Unlike a crawlspace alternative, a full basement provides great returns on your investment. In fact, a well-built basement can actually increase the value of your home when it is time to sell.

It’s not just about long term financial gains. Your basement will pay you back in several other ways as well.

Climate

Basements tend to be cool during the hot summer months and warm during the winter months. Since the basement is naturally insulated from heat and cold, you will not have to spend much money on cooling and heating. Because of its temperate climate, the basement is a great place to spend the day when it gets too hot or cold.

Peace and Quiet

Need some peace and quiet? The basement is a great place to escape into. Alternatively, you can move the exercise room or your children's playroom into the basement. This will make the upstairs quieter.

More Space

The basement is also a great place to accommodate your home office. Since many homes are now built on smaller lots, expanding down is better than expanding out.

Basements are no longer dark and dreary. While they are still prone to moisture and flooding problems, latest moisture prevention technologies have made them more livable. In addition, effective basement water barrier products are available nowadays. They can be installed fast and allows people to enjoy a dry and ready-to-use basement.

Because of these waterproofing techniques, your basement can be used in almost endless ways. Here are some ideas for using your basement.

The basement is perfectly suitable for housing certain kinds of rooms.

Media room

You can create an entertainment room in the basement because it is a secluded place. A dark basement is particularly suitable for housing a media room.

Activity room

Your basement can house a children's playroom or a home workshop. It can even house your private gym. The basement is easily accessible; still it is out of the way. By using the basement in innovative ways, you can free up valuable space upstairs.

Wine cellar

The temperate climate inside the basement makes it ideal for storing wine. So include a wine cellar in your basement plans if you are a wine connoisseur.

Laundry room

Consumers now demand more out of the laundry room. Since the basement has easy access to water and drainage, it is a great place for housing your laundry room.

Recreation room

Homeowners often don't mind experimenting with colors and other design elements in their basements. You can build a fully outfitted recreation room in the basement. You should also consider adding a pool table and other fun accessories. If the basement opens to the patio or the backyard, it can also be suitable for entertaining guests on a warm summer day.

Home spa

This might sound a bit unconventional, but the quiet and the peace of the basement make it a great place to accommodate a sauna.

Several homeowners are including a full basement in their house plan because of the many benefits of having one. Gone are the days when basements were synonymous with flooding. Now they have become an integral part of the family living space.

Refinance and Remodel Your Home

Stuck between the options to go for a refinance or to hold back until home improvements are done? You might possibly be considering a construction loan as well to complete your addition, and then later refinance your mortgage. But there once again, you may feel stuck; should the value of your new addition exceed your appraised value? So, the bottom line is to go for improvement or refinancing? How about if we tell you that you could go for both!

Earlier, there were two distinct ways which people would opt for when they wanted to utilize the equity of their houses for house improvements. Based on their current appraised value, they’d obtain an equity loan. Or put some construction plans and specifications together, include some contractor’s bid and acquire a construction loan.

If you look at it, both the ways fall under second mortgage loans.

The amount for equity loans are based upon the ongoing market value of the home, and the construction loans are mostly set according to the “as finished” value of the home. In simpler terms, that’s the value of the home after the improvement work is done. We all know that while doing a major remodeling of a house, often the construction costs surpass the property’s current value. And when that happens, due to the absence of any equity in the home, lenders are not the party to offer their best programs.

Rates on second mortgages are often higher than the rates on a first mortgage. Also, in the instance of a line of credit or an equity loan, the interest rate is never stable. Initially, it’s lower but later it starts climbing higher. Problematic!

Then, if you were to acquire a construction loan or equity loan, the rates would be mostly higher than your current first mortgage finance. And if the construction phase goes on for two to three months, you can’t count on the interest rate to stay where it was earlier.

Problems, problems, problems… But not anymore.

There are lenders who offer a mortgage finance, which takes care of both the issues. You can now not only refinance a current first mortgage into a lower rate, but also simultaneously borrow more for home improvement. All at today’s lower rates, avoiding higher rates and variable construction loan terms. Fascinating!  

So, let’s say, you are looking forward to add an extra bedroom or an extra floor as an improvement to your home. For example, your current mortgage is somewhere $180,000 while the appraise amount for your house is at Rs. $200,000. Not much scope for equity loan here. The improvement you have in mind will cost $100,000. So after the completion of construction work your new value will be somewhere close to $300,000. Now, thanks to the new mortgage programs, you can borrow funds for your dream home improvements using the “future” appraised value of your renovated home, along with all the equity that follows with it. Plus, the refinance will be available at competitive rates. Exciting, huh?

However, the ratio of these lenders is low. You might have to check with a lot of lenders to come across the ones with the new programs. But to get a construction loan along with a regular finance is worth the effort. So don’t let old experiences stop you anymore from transforming your house into your dream house.

Everything You Need To Know About Rental Agreements

Many people only think about short term gains when they first start flipping homes. However, if flipping is done correctly, it has the potential to create a steady stream of income. The key is acquiring rental properties.

To rent or to flip

You should be able to decide which homes you should flip and which homes you should hold. You should also have a decent understanding of the different kinds of rental agreements.

Look at the existing market scenario. If prices are falling and you don't expect them to increase anytime soon, you should sell the property as quickly as you can. On the other hand, if prices are going upward, you should buy the property and hold it.

If you hold the property, you can rent it out while waiting for its value to appreciate. Value appreciation should not be your only marker for profit. If the property has the potential to generate income, it is worth buying. The rental income that the property generates will help you pay insurance premiums and property taxes.

If you are renting out your property, make sure that you have a proper contract in place. Basically three rental agreements exist.

Fixed Term Lease Agreement

This kind of lease agreement doesn't last more than 2 years. If the tenant signs a 2-year lease agreement, they have a legal responsibility to pay rent for 2 years. It doesn't matter whether they live in the house or not. However, if you are terminating the agreement and asking the tenant to leave, the tenant does not have to continue paying the rent. In this case, the tenant has the right to refuse to vacate the property before the term of the lease agreement ends.

Periodic Lease

This is typically a monthly or a weekly contract. You have no obligation to renew the contract at the end of the month and hence this kind of agreement is ideal for investors who want to flip the property whenever they get a good offer.

Tenant At-Will Lease

Since this rental agreement doesn't include any contracts, the tenants can leave anytime they want. You can also evict them without notice. This method isn't recommended because it is possible for the tenant to leave without paying the rent.

Lease Purchase Agreement

When you sign a lease purchase agreement with the tenant, the tenant has an obligation to buy the property after paying the rent for a specified period of time. If the tenant refuses to buy the property, you can drag them in court.

This agreement is quite popular with investors because it eliminates the need to relist the property or find another tenant at the end of the term.

Lease Option

The lease option is more flexible than the lease purchase agreement. In this case, the tenant doesn't have to buy the house at the end of their lease period. However, they need to pay what is called an 'option consideration' fee.

For a home valued at $100,000, the 'option consideration' fee can be around $10,000. The tenant needs to pay this amount upfront. If they plan to buy the home when their lease period ends, you will have to return this money. However, if they don't decide to purchase, you can keep this amount.

Subletting

In this method, you don't buy the property. You rent it from the owner and then sublet it to the tenant. When you sublet, you can charge a higher rent and make a profit.

Tips for Designing Your Landscape

Looking for great ideas to design your landscape? By simply upgrading your yard, you can give your home a facelift. The best part is that designing your landscape isn't all that difficult or expensive. However, when so many landscaping techniques are available, you might find it difficult to decide which one is right for you.

Here is a quick overview of the hottest landscaping trends that are going to define your yard this spring and summer:

Boxy borders to make a comeback

Landscaping experts have started using plant borders all over again. Plants grown in attractive geometric shapes will give your yard a dramatic appeal. While last year, round corners were more popular, this year boxy borders are all the rage. You can create these borders using low maintenance shrubs. Complement them with stacked containers and green walls.

Add a dash of color

Expect to see a riot of colors this year. More and more landscaping projects now incorporate all colors of the rainbow so plant colorful grasses of all varieties. You should also blend your exotic plants with annuals that require less maintenance. You can expect to encounter containers sporting bright colors like yellow and red. You might even find some metallic shades.

Vertical gardening and green walls

Vertical gardens are already popular in small communities. This trend will only grow in 2014. These gardens are walls of living plants. They also help create a private space in your yard. You can add them to your existing landscaping to give your property a unique visual appeal.

Sustainable landscape plants

Many homeowners now add a mix of vegetables and fruit to their yard. Previously the trend was to use standard landscape plants. Now more people are adopting sustainable lifestyles.

Don't just use ornamental plants for landscaping. By growing herbs, vegetables and fruit you can make the best use of your space. Besides giving your backyard a unique look, vegetables and fruits also provide nutrition to the people who occupy the property.

Incorporate outdoor entertainment technology

Consumer technology is advancing by leaps and bounds and this has started invading our outdoor space as well. People are exploring ways to integrate landscaping and outdoor entertainment. And possibilities are endless. You can, for example, use fountains with sound activated lighting. Many people also use in-built surround speakers. Motion sensor technology lets visitors explore lighted paths. Wireless speakers can be mounted on trees.

Outdoor space to become an extension of indoor space

People now see their yard as an extension of their living space. This encourages them to explore all possible ways to make their outdoor space more functional.

Outdoor furnishings have already become an integral part of landscaping. Many people are also keen on designing play areas in their backyard. A well-designed backyard can even increase the value of your property. In fact, statistics reveal that homes that have an attractive landscape get sold faster. They also command higher prices.

While designing your landscape try to incorporate elements that will increase your enjoyment of the space.

Things to Consider Before Getting a Refinance

Mortgage interest rates are falling and this has encouraged many homeowners to explore the possibility of getting a refinance. However, before submitting your mortgage refinance application, you have got to consider quite a few things.

Remember that low rates can't be the only reason to get a refinance. You need to consider several other factors as well. As a rule of thumb, you should get a refinance only if you plan to keep the home for a long time. If you can't figure out whether refinancing is good for you, you should ask your lender.

When to refinance

You should get a refinance only when the current rates are at least 1 percent lower than the rate you pay on your existing mortgage.

Refinancing involves closing costs. If you don't plan to live in the house for a long time, the monthly savings that you get from the lower rates may not justify the costs of getting a new mortgage.

The closing costs can run 3 percent to 6 percent of the total loan amount. Lenders might add these costs to your loan amount. In that case, you don't have to bring cash to the closing table. However, you will still be paying for it over the life of the mortgage.

Is refinancing right for you?

To determine whether refinancing is good for you, you need to know your current mortgage payment and the new payment. You should also estimate the length of the time you intend to stay in the house.

When you refinance, your monthly mortgage payments will be lower than what you are currently paying. But if you don't live in the house for long enough, you will not be able to recover the closing costs associated with getting a new mortgage.

So, for example, if the closing costs on a $100,000 mortgage are 4%, you will have to shell out $4,000. If your monthly savings after getting a refinance is $80, you have to live in the house for at least 50 months to recover the closing costs. If you sell the property before that, you will incur a loss. It gets better the longer you stay in the house. This also explains why refinancing is not the right option for people who plan to move out in a couple of years.

You should consider refinancing only if the new rate is at least 1% lower than your current rate. If you can get even lower rates, refinancing becomes a much better option. If the rates are lower, your monthly savings will be higher and you will reach your breakeven point in less time.

Some other factors, too, can make refinancing a better option. For example, your earnings might have improved since you took the last mortgage or your credit rating might have gone up. When your income or credit rating is high, lenders will be more interested in considering your application. In this case, you will be able to negotiate lower rates and lower closing costs. This will further shorten your breakeven period.

Bottom line

Don't get refinance just because everybody is getting it. Your financial situation might be different from theirs. When you get refinancing, you are getting an altogether new mortgage. So during the first few years, most of your monthly mortgage payment will go towards interest. This makes it difficult to build equity.

 

5 Reasons to Hire an Interior Designer

While it is true that you can do design your home on your own, you can make the task easier and less stressful by hiring an experienced interior designer. Even if you are a creative person, redesigning your interiors may not be something that you are familiar with.

Renovating a home can be tiring and exciting. You might have great ideas, but you may lack the experience or creativity necessary to implement those ideas correctly. If you feel that you lack the required skills, a practical solution is to hire an interior designer. An experienced designer can suggest unique solutions to make your home look and feel better.

Here are a few things to consider before hiring a professional interior designer:

You get to save money

Interior designers work with contractors and local dealers all the time. As a result, they can buy materials for the best price. If you walk into the store and buy stuff you will probably have to pay a higher price. You may also end up buying too much.

On the other hand, a designer knows exactly how much paint you need for your walls or how many tiles you need for the kitchen or the bathroom. This eliminates wastage. Better still; a professional designer knows how to stick to a pre-determined budget.

You get to save time

Interior designing might require some research. Unfortunately, very few homeowners can spend several hours searching for the right dealers, supplies, materials and manufacturers. When you hire an interior designer, they will do all the research. Consequently, you don't have to flip through the pages of a design magazine to find the best designs and brands. As we have already said, designers know the best possible deals in town. This totally eliminates the need to compare prices.

 

Contacts

An interior designer has established relationships with vendors and suppliers and this gives them access to the best deals. By taking advantage of these contacts, they can maximize their options and create unique spaces.

An eye to detail

You probably want to do away with the old elements in your décor and embrace the new. However, if you are working with an experienced designer, they will be able to use both new and old elements. This saves money. It also helps conserve resources and create a unique look. Since these people have an eye to design, they will be able to suggest new wall art or repaints to highlight the best features of your living space. Repurposing saves money and is crucial to a successful design.

A professional designer can suggest the right creative solutions that will make your space more attractive and inviting.

Selling the house

Professional interior designers know how to stage your home well. So if you are planning to sell your home, you should definitely consider hiring a designer to help you showcase your space at its best.

The way your home appears often determines its sales price. In fact, homes that look attractive get sold quickly and for the best possible price. A designer can suggest ways to get your property ready to sell.

Why Wooden Flooring is a Good Investment for Your Home

Wooden floors bring nature inside and that is their biggest charm. Hardwood flooring is particularly popular in open floor house plans.

Though more expensive, wooden flooring tends to last a lifetime and that makes it cost effective. Ceramic tiles are still the most popular flooring materials for homes. Hardwood flooring is also gaining popularity. In fact, the number of homeowners who get wooden flooring has consistently increased over the last few years.

The impact of great flooring

When you walk into a home, the first element that catches your attention is indeed the flooring. Flooring creates the ambience and binds the different parts of the home together. The flooring used in kitchens and large rooms is particularly important.

When you run wooden planks of the same color and the same species along the length of a room, the result is simply spectacular. For an open floor plan, it creates a seamless look.

Hardwood is still less popular than ceramic tiles because it is more expensive. However, its popularity is steadily increasing. Hardwood flooring is more common in high-end, luxury homes. Entry level homes, too, have started using hardwood flooring.

Why wooden flooring is better

Wooden floors last forever. That is the main reason people get them. If you install flooring that doesn't last for a long time, you will have to take it out at some time. This is a major disruption and it will cost you dearly. On the other hand, when you install wooden flooring, you can rest assured that the floor will outlast your home.

The housing market in the US is showing signs of recovery. The value of homes, too, has appreciated over the last few years. Many people now have considerable equity in their homes. And they are eager to further increase the value of their homes. As a result, they opt for materials that last a long time and have good resale value. Wooden flooring provides good return on investment. Appraisers too have started recognizing its value. This also makes it more popular as a flooring solution.

People now use wooden floors of all kinds. They mix raw finishes with polished one and dark hues with light hues. The black and brown shades are now giving way to lighter ones. That said, the grays aren't going away.

As far as the finishing is concerned, more and more people are getting matte finishes probably because they are better at hiding imperfections. When you use matte finish, you do not have to worry about the scratches on the surface of the wood.

Interestingly, the planks aren't just getting lighter; they are also getting wider. However, before installing a wide plank, you need to examine the quality of the wood.

Solid or engineered?

Solid hardwood tends to be more popular than engineered hardwood. Nearly two-thirds of homes that have wooden flooring use solid hardwood. One-third uses engineered hardwood. Laminates and vinyl sheets can also provide the wooden look. Bamboo and cork are also good alternatives. However, when it comes to wooden flooring, the challenge is to produce the effect that attracts the homeowner to hardwood. Wood exudes comfort and warmth. It brings the nature inside and that is its biggest plus point. Look-alikes can't beat its charm.