GDR Spotlight on Real Estate / January 21, 2022

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VOLUME 3, ISSUE 3

FRESH ON THE MARKET

717 Chesapeake Place, Greenville, NC Listed by Jessica Snyder 252-412-3001

Jessica F. Snyder, Realtor, Broker ABR, CRS, GRI, SLS, SRS, SRES Aldridge & Southerland Realtors 252-412-3001


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Spotlight on Real Estate, Friday, January 21, 2022

What to know about refinancing a mortgage

Historically low interest rates have made now a good time to be a homeowner. According to the Federal Home Loan Mortgage Corporation, also known as Freddie Mac, the average interest rate on a 30-year fixed-rate mortgage in mid-September 2021 was 2.86. Just ten years earlier, the average rate was 4.09. That’s a significant dip, and one that’s saving today’s homeowners tens of thousands of dollars over the life of their mortgages. Interest rates dipped during the pandemic and have remained low ever since. That’s unlikely to last forever, which has given many homeowners a sense of urgency regarding refinancing. Refinancing can be financially advantageous, but there are some things homeowners should know prior to contacting their lenders.

won’t necessarily save money over the long haul if they’re refinancing an existing 30-year mortgage with another 30-year mortgage. The mortgage experts at Mortgage Calculator note that a Change Terms mortgage refinance is characterized by a shift to a loan charging a lower interest rate. The initial savings with such a refinance are undeniable, but changing from one 30-year to another 30-year restarts the mortgage clock, which can add years to the time homeowners will be repaying their debt. As a result, homeowners may end up paying more interest over time than they might have had they just kept their initial mortgage. Homeowners interested in a Change Terms refinance may want to look into switching from a 30-year to a 15year mortgage. A shorter term mortgage will increase the monthly payment, but the loan will reach maturity much faster, greatly REFINANCING DOES NOT ALWAYS reducing the amount of interest homeowners SAVE MONEY OVER THE LONG HAUL will pay over the life of the mortgage. It’s hard to blame homeowners who jump at the chance to refinance their mortgages. REFINANCING CAN BE COSTLY Refinancing is often associated with Lower monthly payments might be the significantly lower monthly payments, and number that catches homeowners eyes as such savings can be used to finance home they look to refinance, but it’s important that improvements, pay for tuition or build homeowners recognize that refinancing is not retirement nest eggs. However, homeowners free. In fact, the personal finance experts at

CASH-OUT VS. CHANGE TERM MORTGAGE REFINANCING Mortgage refinancing has long been a valuable option for homeowners looking to save money. Refinancing has become an especially enticing option since the onset of the pandemic, as mortgage interest ranks have sunk to historic lows. Despite that, a recent survey from Bank rate found that 74 percent of homeowners who have had the same mortgage since before the pandemic have not refinanced. Homeowners who haven’t yet refinanced but are considering doing so can consider two types of mortgage refinancing options. •Cash-out: According to the mortgage experts at Mortgage Calculator.org, a cashout mortgage extracts equity from a home. Homeowners in the United States have more than $6 trillion in untapped home equity, and that can be used to pay for various expenses, including home improvements, tuition and medical costs. The financial experts at Nerd Wallet note that a cash-out refinance works by replacing an existing mortgage with a new home loan for more money than homeowners owe on their homes. The difference is then given to the homeowners in cash, which they can use for the aforementioned expenses or other costs, including paying down highinterest debts. Lower interest rates typically entice homeowners to refinance, but if homeowners are solely looking for lower rates, then a cash-out refinance is probably not the best option. •Change term: Also known as a rate-and-

term refinance, a change term is a refinance characterized by shifting to a lower interest rate. Homeowners also may refinance utilizing a change term to shift from an adjustable rate mortgage to a fixed-rate loan. Change term refinancing also is popular for homeowners who want to switch from the standard 30-year fixed rate to a 15-year fixed rate. This can shorten the term of the loan, saving homeowners a lot of money in interest over the 15-year period. However, homeowners should note that switching from a 30-year to a 15-year loan will lead to higher monthly payments. This switch might be most suitable to individuals earning significantly higher salaries than they were at the start of their initial mortgages and/ or homeowners whose cost of living has recently decreased due to certain changes, such as children graduating from college. Homeowners also may consider change term mortgages to lower their monthly payments. In such instances, they simply swap out an existing 30-year mortgage for a new 30-year mortgage with a lower interest rate. That can save money up front, but homeowners should calculate the long-term interest costs of switching to a new 30-year mortgage. The lower monthly payments might be tempting, but homeowners may ultimately pay more in interest over the life of both loans by switching to a new 30-year mortgage. - Metro Content

Kiplinger note that refinancing incurs many interest rates to compensate for refinancing of the same costs that homeowners had to costs. That can negate the savings and end pay when they signed their initial mortgage up costing homeowners more money than papers. That includes fees, taxes and the original mortgage. appraisal costs. These costs are sometimes Refinancing is an option for homeowners paid up front, but they also might be rolled who want to save money. Homeowners can Elite Properties Elite Properties into the loan balance. In the latter instance, speak with a financial advisor to determine homeowners could be paying interest on if this is the best way to save money over their refinancing costs. Homeowners who are the long haul or if refinancing will ultimately refinancing solely because of lower interest cost them more over the life of the mortgage. Elite Properties rates should know that some lenders raise - Metro Content

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Spotlight on Real Estate, Friday, January 21, 2022

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Factors to consider before investing in real estate The appreciation of real estate over time has long made owning a home or an investment property a sound financial strategy. Prospective home buyers spend considerable time looking for a property they’re hoping to call home. Various factors, including property taxes and the reputation of local schools, may be considered as homeowners decide where to look for a new home. That vetting process is equally important, albeit slightly different, when buyers are consider investing in properties they don’t intend to live in. Real estate can be a great way to diversify an investment portfolio and earn extra income. Before shopping for an investment property, novice investors may want to consider certain factors to determine if real estate is the best investment vehicle for them. • Rental potential and the local labor force Location is a significant factor to consider when investing in real estate, but

recent shifts in how and where people work could change the real estate investment landscape. A 2020 Gartner, Inc., survey of more than 300 financial executives and leaders in the finance industry found that roughly 25 percent will move at least one out of every five of their on-site workers to permanently remote positions in the years ahead. Economists note that this shift to remote working could be among the more lasting trends to emerge from the pandemic. Before investing in real estate, prospective investors should examine local trends to see if more and more locals are working remotely, and whether or not that’s affecting the market for rentals. • To flip or not to flip Flipping properties gained popularity in the second decade of this century, but figures from the property database curator ATTOM Data Solutions indicates that returns on investments in flipped properties declined for the third straight year in 2020. Though flipping

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can still yield a strong return, investors may not realize the returns on flipped properties that they might have realized as recently as five years ago. Potential investors should conduct some research regarding real estate market trends, including flipping data where available, to make the most informed decision possible. • Condition of the property Product shortages were another trend to emerge during the pandemic, and disruptions to the supply chain will not necessarily go away anytime soon. In addition, the cost of various products associated with home improvements, including lumber, skyrocketed during the pandemic. The National Association of Home Builders noted that while lumber prices declined in 2021, the price of lumber packages quoted to builders remained high. That means real estate investors who invest in properties that will need work could be forced to pay a lot to fix these properties. And ongoing supply chain issues could extend the

time it takes to renovate a property. Investors must be able to bear these costs and lag times to make the most off their real estate investments. Investment properties can be a great way to diversify a portfolio. Potential investors must consider a host of factors to determine if real estate is an investment they want to make. - Metro Content

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Spotlight on Real Estate, Friday, January 21, 2022

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