Blog – CTeBockhorst's Blog

Looking to Pay Back Your Mortgage Faster? Three Reasons to Consider Switching to Bi-weekly Payments

September 20, 2023 by Coleen TeBockhorst

Looking to Pay Back Your Mortgage Faster? Three Reasons to Consider Switching to Bi-weekly Payments While there are differing schools of thought when it comes to whether or not a person should pay off a mortgage before the loan term ends, there may be some benefits to making payments on a bi-weekly basis as opposed to monthly basis. What are some of the reasons why it may be beneficial to make two payments a month instead of one? Here are three reasons why you should ditch the monthly fees and make payments once every two weeks.

You’ll Make An Extra Payment Per Year

If you’re looking to pay off your mortgage ahead of schedule, making bi-weekly payments means you’ll make an extra payment every year. Instead of making 12 large payments every year, you’ll make 26 small payments. These 26 small payments would be equal to about 13 large payments.

This is the equivalent of an extra payment per year and 10 extra payments over 10 years. If you have a 30-year mortgage, you could pay it off between two and three years early because you will make your last payment 30 months ahead of schedule.

You’ll Provide Yourself With Financial Flexibility

Making extra payments can provide you with financial flexibility that makes it easier to deal with unexpected expenses or a job loss. As you are making a half-payment every two week, you can make your payments in smaller, more manageable chunks.

It may be a good thing if you are self-employed and may not be sure when a client will pay for services rendered. Additionally, you may have your next payment reduced or advanced if you pay more than you owe in a given month.

You’ll Reduce the Amount of Interest Paid on the Loan

Paying off your mortgage faster reduces the amount of interest that you pay on the loan. Even if you only make one extra payment per year, you could still save thousands of dollars in interest by paying your loan several months or years early.

To determine exactly how much you will save, you can use an amortization table or calculator to see how much interest you pay over the full 30 years as opposed to taking only 27 or 28 years to pay for your home. It is also important to note that making extra payments adds to the equity that you have in the home.

Making two payments instead of one each month may help you achieve financial flexibility while building equity in your home. By paying off your mortgage as soon as possible, it may enable you to put more money into a savings or retirement account. Contact a mortgage professional for more information about whether bi-weekly payments are right for you.

Understanding the Differences Between ‘Prequalified’ And ‘Preapproved’ For a Mortgage

September 15, 2023 by Coleen TeBockhorst

Understanding the Differences Between 'Prequalified' And 'Preapproved' For a Mortgage Are you in the market for a new home? If you are going to rely on mortgage financing to cover some of the purchase cost, you will need to start the application process as soon as possible. However, what if you just need to know how much you will be able to borrow so you can start finding homes in your price range?

Let’s take a quick look at the difference between being ‘prequalified’ and ‘preapproved’ for mortgage financing.

The Process Starts With Prequalification

The first step in obtaining mortgage financing is to speak with a mortgage professional to get prequalified. After sharing some quick information about your financial assets, income, and any debts, your advisor will share a range of financing options and amounts that you may qualify for. Prequalification is typically done free of charge and either in person or over the phone.

Note that your mortgage lender will not be doing any digging in the prequalification stage. There’s no credit check and no hard look at your assets. Don’t get too excited if you are prequalified for a large mortgage as you will still need to be approved.

Once You Are Preapproved, You Are All Set

Preapproval, on the other hand, is a firm commitment to access to a certain level of mortgage financing. Your mortgage lender will require a variety of information to get an idea of your financial situation, your current and future employment, your level of risk and more. Once they have a good idea of how much mortgage you can afford, you will be provided with a conditional commitment letter. This letter outlines how much the lender is willing to offer to you as well as other vital information like your mortgage loan interest rate.

Speed Up The Process By Preparing Beforehand

Finally, it is worth a mention that you can speed up the mortgage process by having all of your application paperwork ready before the initial meeting. Gather up your most recent income tax returns, pay stubs and bank statements. If you have investments or other financial assets, document those. You will also want to be up front about any outstanding debts that you are paying off. The more prepared you are, the faster the application and pre-approval process will go.

Have you found the home of your dreams? Our team of mortgage professionals are ready to help you finance it. Contact us today and we will be happy to assist you with getting both prequalified and approved for a mortgage.

Should I Consolidate My Debts with a Mortgage Refinance Loan?

September 13, 2023 by Coleen TeBockhorst

Should I Consolidate My Debts with a Mortgage Refinance Loan? Managing multiple debts can become overwhelming and burdensome. Juggling various loan payments with varying interest rates and repayment terms can lead to financial stress and missed opportunities. One solution that borrowers often consider is consolidating their debts through a mortgage refinance loan. While this approach can be beneficial for some, it’s crucial to carefully evaluate its pros and cons before deciding.

Understanding Debt Consolidation

Debt consolidation is the process of combining multiple debts, such as credit card balances, personal loans, and other unsecured debts, into a single loan. The goal is to simplify repayment by having one manageable monthly payment with potentially lower interest rates and extended repayment terms.

Pros of Consolidating Debts with a Mortgage Refinance Loan

Lower Interest Rates: One of the primary advantages of consolidating debt with a mortgage refinance loan is the potential for lower interest rates. Mortgage loans generally offer lower interest rates compared to credit cards and other unsecured loans.

Single Monthly Payment: Combining multiple debts into a single loan means you’ll have only one monthly payment to manage, reducing the chances of missing payments, and improving your credit score in the long run.

Extended Repayment Terms: Mortgage loans often come with longer repayment terms compared to other types of debt.

Potential Tax Benefits: In some cases, the interest paid on mortgage loans is tax-deductible. By consolidating debts into a mortgage refinance loan, borrowers might be able to benefit from certain tax deductions.

Cons of Consolidating Debts with a Mortgage Refinance Loan

Risk to Homeownership: When consolidating debts with a mortgage refinance loan, you’re essentially using your home as collateral. If you’re unable to make payments on the consolidated loan, you risk foreclosure, potentially losing your home.

Closing Costs and Fees: Refinancing a mortgage comes with closing costs and fees, which can add up to a significant amount. It’s essential to factor in these costs while assessing the overall financial impact of debt consolidation.

Long-term Cost: While lower interest rates and extended repayment terms can provide short-term relief, consolidating debts into a mortgage refinance loan may result in higher overall interest payments over the extended loan term.

Discipline Required: Debt consolidation is not a magic fix for financial issues. Without responsible financial habits, individuals may accumulate new debts, putting them in a more challenging position than before consolidation.

Consolidating debts with a mortgage refinance loan can be a viable option for some borrowers, offering lower interest rates, simplified payments, and potential tax benefits. However, it also comes with inherent risks and additional costs that must be carefully considered. Before deciding, it’s crucial to assess your financial situation, consult with a financial advisor, and explore other debt consolidation alternatives.

Working From Home: 5 Best Tips To Make It Work

September 12, 2023 by Coleen TeBockhorst

Working From Home 5 Best Tips To Make It Work Carving out space for a home office isn’t always easy, but if you have the option to work from home even part of the time, it’s essential to have a space that works for you.

Here are 5 great ways to meet those needs:

Adapt A Closet

A guest room closet with bi-fold doors can become a perfect workspace with the addition of a shelf at the proper height to hold a computer or calculator and proper task lighting. Hang a bulletin board or add open shelving on the back wall. Multiply the functionality with a small cabinet or a portable file rack. The advantage of going to work in a closet is that you can close it off completely without having to do a daily cleanup.

Grab A Corner From Living Room or Bedroom

Tuck a table desk into a corner of the living room or bedroom, assuming that you can work during the day when others aren’t sleeping or actively “living” in the space. Small table desks serve a variety of purposes, from serving snacks to displaying artwork, and are perfectly adaptable as work space, with a minimum of effort. All you really need is a good lamp and a nearby electrical plug in order to create an office.

Claim Space In A Wide Hallway

With a space as narrow as about 30 inches and minimal depth, it’s possible to set up a small tabletop and chair to serve your needs for making phone calls, organizing schedules or planning appointments. It may not be ideal, but if space is at a premium it can be functional for short bursts of work at home.

Look For Multi-Purpose Furniture

A home office can exist in a den or dining room that has either a credenza or a tall cabinet with doors. Think about your needs, and seek out furniture that will fill the bill. Traditional period “secretaries” with closed door storage and a fold-down desktop are perfect, but even ramshackle armoires can be repurposed as office cabinets.

Look For Unused Space

If you have a mostly empty storage room, even if it’s located in the garage, clean it out and clean it up. Add proper lighting, and even a portable heater or air conditioner. Brighten the space with fresh paint and an area rug, find second-hand furniture at garage sales or estate sales, and get creative with accessories.

Be Aware Of Your Needs

There are two primary requirements for a home workspace, no matter what kind of work you do: storage space for the tools, supplies, files and accessories that you need; and privacy. It’s nice to be able to close the door on your work and “go home,” so the more insulated your home office is from other family activities, the more efficient it will be. Even if space is minimal, it can work for you!

Be sure to contact your trusted mortgage professional to get started with the pre-approval process as soon as you are in the market for a new home.

What’s Ahead For Mortgage Rates This Week – September 11, 2023

September 11, 2023 by Coleen TeBockhorst

What's Ahead For Mortgage Rates This Week - September 11, 2023 Last week’s scheduled economic reporting was limited due to the U.S. Labor Day holiday on Monday. The Federal Reserve released its Beige Book report and weekly readings on mortgage rates and jobless claims were also published.

Federal Reserve Releases Beige Book Report

The Beige Book report is a summary of information supplied to Federal Reserve policymakers by their business and professional contacts. Highlights of September’s Beige Book report included:

Accelerated leisure spending by consumers boosted economic growth during July and August.

Non-essential retail sales slowed, but the economy was boosted by a final stage of post-COVID-19 pent-up demand.

Prices for consumer goods fell faster than in many other sectors.

Auto sales rose due to better inventories available to consumers but increased sales were not connected with rising consumer demand for vehicles.

Rising business costs reduced profit margins.

The Beige Book report is published eight times a year before scheduled meetings of the Federal Reserve’s Federal Open Market Committee.

Mortgage Rates, Jobless Claims Fall

Freddie Mac reported lower mortgage rates last week; rates for 30-year fixed-rate mortgages averaged 7.12 percent and were six basis points lower than in the previous week. Rates for 15-year fixed-rate mortgages were three basis points lower and averaged 6.52 percent.

Initial jobless claims were lower with 216,000 first-time claims filed as compared to the prior week’s reading of 229,000 initial jobless claims filed. Analysts expected a reading of 230,000 new jobless claims filed.

What’s Ahead

This week’s scheduled economic reports include readings on inflation, U.S. retail sales, and the preliminary monthly report on consumer sentiment. Weekly readings on mortgage rates and initial jobless claims will also be released.

Does Your Homeowner’s Insurance Policy Cover Storm Damage?

September 8, 2023 by Coleen TeBockhorst

Does Your Homeowner's Insurance Policy Cover Storm Damage? If you own a home, you must make sure it is properly protected. Hazards can change throughout the year, and one of the biggest threats during the spring is the arrival of frequent thunderstorms. If your home is damaged by a severe storm, it might be covered by your homeowner’s insurance policy. You need to take a closer look at your policy to see if you have the right coverage.

An Overview Of Home Insurance

An insurance policy is supposed to protect you against potentially severe financial consequences. For example, if your home is damaged, the repair bills could be tens of thousands of dollars. If you have home insurance, your policy may pay for this type of damage.

The right insurance policy can repair damage to your roof, fix your walls, and even replace the furniture that might have been damaged. Typically, your home insurance policy will have an initial deductible, which is an out-of-pocket expense. Then, once your deductible has been met, your home insurance policy should cover the rest up to the limit of its coverage.

Does Home Insurance Cover Storm Damage?

It isn’t unusual for a home insurance policy to cover potential storm damage. At the same time, you need to understand the limitations of your policy and the circumstances under which a claim might be paid out. For example, your home insurance policy might protect your home in the event of a thunderstorm, but it may not protect your home in the event of a flood from a nearby river or lake. You should also make sure you have enough financial coverage in your home insurance policy to repair your home and replace any damaged property.

How To Check A Home Insurance Policy

Start by reading through your policy to see what is covered in what is not. There might be a lot of jargon in the policy. If you have a difficult time understanding the wording, you should contact your insurance company and speak to a representative.

You should keep a copy of your home insurance policy in a fire-proof container or safe. This will make it easier for you to refer back to the policy if you have questions later or in the event of an emergency.

Ways That You Can Go Greener On Your Home Improvement

September 7, 2023 by Coleen TeBockhorst

Ways That You Can Go Greener On Your Home Improvement Making your home improvement projects more environmentally friendly is a great way to reduce your carbon footprint and help protect the planet. Here are some ways you can go greener on your home improvement projects:

Use eco-friendly materials: Consider using materials that are made from sustainable and renewable resources such as bamboo, cork, or recycled materials. These materials not only have a lower impact on the environment but can also add a unique touch to your home.
Choose energy-efficient appliances and fixtures: When choosing appliances and fixtures for your home improvement project, look for those that are Energy Star rated. These appliances and fixtures are designed to be more energy-efficient, which can save you money on your utility bills in the long run.
Install a programmable thermostat: A programmable thermostat can help you reduce your energy usage by allowing you to set temperatures for different times of the day. This way, you can adjust your home’s temperature based on when you are home or away.
Incorporate natural light: Adding skylights, larger windows, or light tunnels can help bring natural light into your home, reducing the need for artificial lighting during the day.
Choose low-VOC paints and finishes: Volatile organic compounds (VOCs) can be harmful to the environment and your health. When choosing paints and finishes for your home improvement project, look for low-VOC options.
Implement water-saving measures: Install low-flow showerheads, faucets, and toilets to conserve water and reduce your water usage.
Select materials that are locally sourced: Choosing materials that are locally sourced can help reduce the environmental impact of transportation and support local businesses. Look for materials that are produced within a 500-mile radius of your home.
Recycle and repurpose: Instead of throwing away old materials and fixtures, try to recycle or repurpose them. This can help reduce waste and save money on your project.

By implementing these green home improvement practices, you can reduce your impact on the environment while also improving your home’s energy efficiency and overall sustainability.

What’s Ahead For Mortgage Rates This Week – September 5, 2023

September 5, 2023 by Coleen TeBockhorst

What's Ahead For Mortgage Rates This Week - September 5, 2023

Last week’s economic reporting included readings on inflation, consumer sentiment, and weekly readings on mortgage rates and jobless claims.

Inflation Rates Are Similar in August

Month-to-month, the inflation rate holds relatively steady at 3.18 percent. This is slightly up when compared to 2.97 percent last month; however, it is significantly lower than the rate of 8.52 percent last year. When compared to the long-term average, inflation is trending in the right direction, as the long-term average is 3.2 percent.

Inflation rose at a pace of 0.20 percent in July and met analysts’ expectations. There was no change in the pace of month-to-month inflation from June’s reading of 0.20 percent growth. The Consumer Price Index also reported that year-over-year inflation reached 9.10 percent, which was the highest reading since reaching a 40-year high in mid-2022.

While we still wait for core inflation, experts predict it to come in at around 3.38 percent. Core inflation, also known as the CPI, excludes food and fuel prices, which are historically volatile. If core inflation comes in at 3.38 percent, this would be significantly lower than the July reading of 4.7 percent.

Right now, it is unclear whether the Federal Reserve will raise interest rates, as they are still waiting for other metrics, including the core inflation above.

Mortgage Rates Rise, Job Market Cools

The 30-year fixed, the preferred metric for mortgage rates, remains at around 7.53 percent. These are the highest mortgage rates of the last 20 years. Rates continue to rise when compared to July’s mortgage rates, which were just under 7 percent. This continues to put pressure on those interested in purchasing homes. The 15-year fixed mortgage rate is about 6.81 percent. This is slightly higher than the 15-year fixed for August, which was 6.55 percent on average.

When comparing these mortgage rates to last week, the 30-year fixed has gone up. It was 7.23 percent, on average, last week, and has jumped to 7.53 percent this week. The average rate for a 15-year fixed is 6.81 percent this week, which is slightly higher than last week, where the average 15-year fixed was 6.55 percent.

It appears that the increase in interest rates is finally having an impact on the job market. Unemployment rose to 3.8 percent, and the economy added 187,000 jobs in August. While these are still historically solid numbers, it is clear that the job market is cooling, when compared to July.

University of Michigan Consumer Sentiment Survey

The University of Michigan released its monthly consumer sentiment report, and consumer sentiment has dropped slightly when compared to last month. The index reading was 72.0 in July, but it dropped to 69.5 in August. The overall sentiment regarding the economy also dropped from 76.6 in July to 75.7 in August.

These numbers reflect that consumers are still a bit wary of economic conditions. While inflation continues to come down, many consumers are likely still nervous about the increase in interest rates and the cooling job market. While sentiment remains positive, there is some cooling in the economy.

What’s Ahead

During the next week, mortgage rates will get an update, and the Federal Reserve will receive some new metrics regarding the economy. These numbers will be very important for the Fed, as it decides whether it will raise interest rates again in September in an attempt to cool inflation further.

Understanding the Mechanics of a HELOC Loan

September 1, 2023 by Coleen TeBockhorst

For many homeowners, a Home Equity Line of Credit (HELOC) can be an attractive financial tool, offering a flexible way to access funds while leveraging their property’s equity. A HELOC works differently from a traditional home loan or mortgage, providing borrowers with a revolving credit line that they can draw from as needed.

What is a HELOC?

A Home Equity Line of Credit is a type of loan that allows homeowners to borrow against the equity they have built in their property. Equity is the difference between the home’s current market value and the outstanding mortgage balance. HELOCs are typically offered by banks, credit unions, and other financial institutions and are often regarded as a “second mortgage.”

How does a HELOC work?

A HELOC operates like a credit card or a checking account with a pre-approved limit. When you apply for a HELOC, the lender assesses your creditworthiness and the amount of equity you have in your home to determine your credit limit. This limit is typically a percentage of the home’s appraised value, minus any existing mortgage.

Once approved, borrowers can access the funds as needed during the “draw period,” which typically lasts around 5 to 10 years. During this time, you can borrow and repay the funds multiple times, just like using a credit card. You only pay interest on the amount you have withdrawn.

Interest Rates and Repayment

HELOCs usually have variable interest rates, which means that the rate can fluctuate with changes in the market index. The interest rates are generally lower than those of credit cards and other unsecured loans, making a HELOC an appealing option for consolidating higher-interest debts or funding significant expenses, such as home renovations or educational costs.

During the draw period, borrowers are usually required to make interest-only payments each month. However, some lenders may allow borrowers to make both principal and interest payments. During this phase, borrowers can no longer withdraw funds and must repay both principal and interest, often leading to higher monthly payments.

Advantages of a HELOC

Flexibility: Borrowers have the freedom to use the funds for various purposes, from home improvements and debt consolidation to emergency expenses and educational costs.

Lower interest rates: Compared to other forms of credit, HELOCs often offer more favorable interest rates, making it a cost-effective financing option for eligible homeowners.

Tax benefits: In some cases, the interest paid on a HELOC may be tax-deductible, but it’s essential to consult a tax advisor to understand the specifics of your situation.

A Home Equity Line of Credit can be an excellent way for homeowners to access funds for various financial needs. By understanding how a HELOC works, its benefits, and potential risks, borrowers can make informed decisions about whether it suits their financial goals and circumstances.

Responsible use, careful planning, and regular review of your financial situation are essential to make the most of this powerful financial tool and avoid potential pitfalls. As always, it’s advisable to seek professional financial advice before making any major financial decisions.

Buying Vs. Building a House

August 31, 2023 by Coleen TeBockhorst

Buying Vs. Building a House Deciding whether to buy or build a house can be a complex decision that depends on several factors. Here are some pros and cons to consider:

Pros of Buying a House:

Convenience: Buying a house is generally quicker and more convenient than building one. You can move in as soon as you close the deal, without having to wait for construction to be completed.

Location: When you buy a house, you have the opportunity to choose a home in an established neighborhood with existing amenities such as schools, parks, shopping centers, and other essential services. You can choose a location that is convenient for your lifestyle.

Cost: Depending on the location, buying a house may be less expensive than building a new one. You can often find great deals on homes that have been on the market for a while, or in areas where the real estate market is more favorable to buyers.

No Hassle of Design and Construction: When you buy a house, you don’t have to worry about designing the home or supervising construction. You can focus on personalizing the house according to your taste, rather than starting from scratch.

Resale Value: Buying an established home often means it already has a resale value, making it easier to sell in the future.

Cons of Buying a House:

Limited Customization: When you buy an existing house, you may have limited options for customization. You’ll need to accept the home’s layout, features, and design unless you’re willing to invest additional time and money to make renovations.

Unpredictable Market: Real estate markets can be unpredictable, and the value of your home may fluctuate depending on economic conditions. There’s always a risk that the value of your home may decrease in the future.

Maintenance: As a homeowner, you’ll be responsible for maintaining and repairing the home, which can be costly. Older homes may require more maintenance than newer ones, which can add up over time.

Hidden Problems: Even with a thorough home inspection, there may be hidden problems with the house that you only discover after moving in, such as foundation issues, electrical problems, or water damage.

Pros of Building a House

Customization: You can design the house to your exact specifications, ensuring that it meets your unique needs and preferences.

New materials and technology: You can take advantage of the latest building materials and technology, which can make the house more energy-efficient and environmentally friendly.

No hidden problems: Since the house is new, there should be fewer hidden issues or problems to deal with.

Cons of Building a House

Cost: Building a house can be more expensive than buying an existing one, especially if you choose high-end materials or features.

Time-consuming: Building a house can take months or even years to complete, which means you’ll need to be patient and flexible.

Uncertainty: There may be unexpected delays or complications during the construction process, which can be frustrating.

Buying a house can be a smart and practical option for many people, especially those who prioritize convenience, location, and cost savings, buying a house is a big decision that requires careful consideration of both the advantages and disadvantages. It’s important to do your research and weigh your options before deciding.

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