All posts by Tomie Raines Housing News

What Does Recasting a Mortgage Loan Involve?

Finance and Taxes

Refinancing your mortgage is expensive, especially if you just want to lower your monthly payments. Closing costs can be in the thousands of dollars because you’re essentially applying for a new loan. Is there another way to lower your monthly payment? Yes: You can recast your mortgage.

In simple terms, a mortgage recast involves making a lump-sum payment toward the principal balance of your loan which the lender uses to create a new amortization schedule which will lower your monthly payments.

Every mortgage has an amortization schedule that directs part of your payment to reducing principal or toward paying interest. These amounts change slightly every month, until your payments go from paying mostly interest to paying down your principal. With a recast, your interest rate and term remain the same, but your monthly payments are lower because you paid a lump sum toward the principal.

To qualify for a recast, you’ll need a minimum of $10,000 and you’ll pay a service fee of approximately $250. Though the recast isn’t a new loan, you must qualify to get one: 

  1. Lenders may have differing requirements and fees, from the amount of the lump-sum payment, to how many on-time payments you’ve made, to how much equity you have in your home.
  2. Recasts are not available on government-guaranteed loans such as FHA, VA, or USDA.

When you receive a bonus at work or decide to close out your savings, it’s a great idea to build equity in your home.

What’s the Difference Between a Condo and a Co-op?

Buyer Information

Condominiums and co-ops are great choices for first-time homebuyers, singles, couples and roommates, and down-sizing families, but they are very different types of property ownership.

As an investment, a condo owner is free to rent out their unit, but some HOAs impose limits on the number of units within the community that can be rented out or restrictions that prevent short-term rentals or the use of some amenities, because a high number of renters raises the HOA’s exposure to risk.

Condominiums are usually located in the most in-demand areas, near plentiful jobs and entertainment districts. You’ll own your unit and share amenities with other owners such as garage parking, fitness rooms, and swimming pools. You’ll pay a monthly, quarterly, or annual homeowners association (HOA) fee which is levied to take care of common areas. HOA fees vary widely, depending on amenities and the market.

Co-op owners have a percentage ownership of their building and property, based on the size of their units, but they don’t own their individual units. In the Lansing area The Ponds, located in Okemos, is a co-op operated like a corporation in which homeowners are shareholders. They have the right to approve new owner-occupants and can reject them based on financial requirements. They can’t discriminate against protected classes, such as race, creed, age or gender. Most co-ops don’t allow renters; if they do, they impose restrictions such as rental terms and credit worthiness.

How Can You Vet Contractors?

About the house...

When you choose to remodel your home, it’s crucial that you hire the right contractor for the job. You can get referrals from friends, family, or your Berkshire Hathaway HomeServices network professional. But there are other ways to get information so you can make the right choice.

It’s a good idea to interview at least three contractors, including your referrals. Depending on your state’s licensing rules, you should know the rules and regulations for licensing professionals. The purpose of licensing is to ensure that “the contractor meets the city’s, town’s, or state’s requirements for working on residential and commercial construction projects.” Not all states require contractors to be licensed, and some focus only on specialties such as plumbing, electrical and HVAC, which makes it harder to ascertain a contractor’s expertise.

Angi.com offers a convenient state-by-state list of contractor license requirements and a license check tool with “links to the regulatory agencies’ real-time license verification websites” so you can confirm the contractor’s status before you hire. Some states also provide certifications that show the contractor has completed educational and work requirements for their specialties. Some regulators require contractors to carry general contractor insurance, provide references, financial statements, and proof of registration.

Ask for references and to see a portfolio of completed jobs. The contractor should agree to provide a written, detailed contract outlining the work to be done, the costs for each step, quality of materials to be used, completion dates, payment and inspection schedules, warranties, and means of communicating.

Lansng Area Home Values Increase 13.8%

Current Lansing Area Sales Statistics, Market Update

First quarter 2024 sales statistics showed that the average sales price of Lansing area homes increased 13.8% from $217,376 at the end of the first quarter of 2023 to $247,308. This represents an average home value improvement of $29,927.

The fact that there were 121 fewer sales so far in 2024 (-11.1%) represents a lower number of homes being offered for sale with established homeowners reluctance to give up a 3.5% mortgage in order to enter into a now 7.17% mortgage on a different home.

The 13.9% increase in home value indicates strong buyer enthusiasm by those moving into the Lansing area and those able to adjust to higher mortgage rates. First time home buyers have been hit hard with the increased interest rates that require budgeting changes and higher down payments. Local lenders and the State of Michigan’s MSHDA program have offered relief with mortgage incentives that accommodate lower income buyers.

First Quarter 2024 Sales Statistics

Snapshot of current Lansing area sales entering into the Spring selling season:
Lansing Area Market View –May 1, 2024
 436 – currently listed homes for sale in the five county greater Lansing area.
 258 – homes with accepted offers. (Awaiting inspections and/or appraisal.)
 381 – homes listed as Pending. (Have completed inspections and will soon close.)
 1454 – homes that have closed since January 1, 2024. 

Current Mortgage interest rates 
  30-year fixed – 7.17% ($677 per $1000)
  15-year fixed – 6.44% ($868 per $1000)

Should You Tap into Your Home Equity?

Finance and Taxes

When you put 20% down on a home using a mortgage loan, you own 20% and the lender owns 80%. As you make payments, most of the money goes to pay interest while some goes toward reducing your principal. Meanwhile, favorable market conditions may be increasing the market value of your home, giving you instant equity.

Equity is the amount of the home that you own, much like a savings account that pays interest on money you want to keep growing. After a few years, you may want to tap into that money to carry out home improvements, make a down payment on a second property, or pay off credit cards and other bills. Is it a good idea to use your equity?

The answer is this: you’re putting your home in deeper debt, so your reasons for using equity instead of another means of borrowing or consolidating must be worth the risk.

Home improvements are designed to add value to your home, a sure thing that will net you more money when you decide to sell it one day. Making a down payment on another home is riskier—as you’ll have two mortgages—but if you can afford it, you’ll have two properties potentially building equity.

Credit cards are unsecured debt so interest rates are high. Home equity loans are far less costly, so you could get much relief by paying credit cards off. However, you must avoid “reloading” the cards with new charges, which will take dedication and self-discipline.

Should You Make Repairs Before Listing Your Home for Sale?

Seller Information

In a fast-moving housing market, you may conclude that you don’t need to do much to sell your homes. But, selling a home “as is” may cost you more than you know.

Your listing contract will include a clause that says the home is being conveyed “as is,” which means you’re selling the property in its current condition with no intention to make repairs or improvements. That doesn’t absolve you of responsibility to the homebuyer—you’ll still have to provide a state-mandated seller’s disclosure attesting to what you know about the home’s condition. 

If the buyer includes a home inspection contingency in the sales contract, it allows them to come back and ask for repairs before closing or they can ask for a price reduction. You can refuse, and the home will go back on the market, wasting precious marketing time. In the event that the buyer intends to tear down or gut the home, the sales contract can be drafted without an inspection contingency or it can be contingent to major systems only.

There’s also a stigma to selling “as is” which means the buyer is purchasing the property sight-unseen and will likely make a much lower offer—if they make one at all. Your home could stay on the market longer than you want, leaving you obligated to manage expensive carrying costs, including the mortgage, home insurance, HOA fees, utilities and taxes.

Business as usual in the Lansing area housing market

Current Lansing Area Sales Statistics, Market Update

The spring home-buying season has begun, and it’s business as usual. The combination of high mortgage rates, and home prices, along with low housing inventory means that home buyers will have to adjust to the reality of elevated home prices and mortgage rates if they want to buy a home in the near future.

Will there be a significant change in the 2024 housing market?
There has been discussion about rates dropping a percentage or two, but a 6% loan isn’t going to push current home owners into giving up a home with a 3.5% mortgage. Perhaps 5% will look attractive to first time home buyers…but would you give up your 3.5% mortgage to move in this competitive market?

Of course, lower mortgage rates would stimulate sales…but also drive up property values as it did during the years of 3% and 3.5% loans. Armed with affordable loans, buyers will need to make  competitively high offers to land a home in a market with low inventory.

Snapshot of current Lansing area sales entering into the Spring selling season:
Lansing Area Market View – April 1, 2024
 418 – currently listed homes for sale in the five county greater Lansing area.
 249 – homes with accepted offers. (Awaiting inspections and/or appraisal.)
 325 – homes listed as Pending. (Have completed inspections and will soon close.)
 982 – homes that have closed since January 1, 2024. 

Current Mortgage interest rates 
  30-year fixed – 6.79% ($651 per $1000)
  15-year fixed – 6.11% ($849 per $1000)

Home and auto insurance coverage is steadily increasing

About the house..., Finance and Taxes

The severity and frequency of insurance claims, along with the cost of goods and services are why carriers are raising their base rates…and your coverage may not be keeping up with inflation. Rising replacement costs means that what used to be covered by your policy may no longer be sufficient.

Attached are two flyers from the Hanover Insurance Group that explain why rates are increasing and underwriting is tightening up.
Understanding Trends Impacting Homeowners Coverage

Why you may need more home and auto coverage.

The Lansing area housing market is experiencing an unprecedented trend.

Market Update

Home sellers currently receive historically high prices for their homes…yet fewer home sellers are putting their properties on the market…despite the temptation to cash in. The reason is, that mortgage interest rates are more than double what they were just prior to July 2022.
Home owners with low interest rate mortgages are unwilling to give them up! 

Many are only selling their home if they can pay cash for their next home, downsize to something smaller with less upkeep, or move to a new city and state where a similar home is less expensive than the one they’re selling. 

Residential Real Estate Values Depend on Sales
The number of available homes for sale (currently 447) is constantly growing or shrinking with market trends dependent on the sales prices of closed listings, time on market, price increases and/or reductions. It’s no secret that inflation, interest rates, uncertain economic conditions, weather, and even politics are having an affect on the 2024 real estate market.

Home Listings are Vital
However, 5608 Lansing area homes closed in 2023 with mortgage rates as high as 8%. The 447 currently listed homes represent a residential housing inventory that will be ‘sold out’ in five weeks!

Navigating the 2024 Housing Market

Market Update

In the new year, homebuyers and sellers are still facing the same challenges as they did in 2023—high interest rates, sky-high home prices, and an inadequate supply of homes. As affordability issues slow housing sales volume, low supplies are keeping home prices high.

Mortgage interest rates reached 8.01% in October, the highest level since 2000, but since then rates have come down. Bankrate.com experts say there’s no likelihood of a housing market turndown as long as lending standards remain strict, and there aren’t enough homes to meet demand. 

Banks are tightening their lending standards due to increases in credit card and car loan delinquencies, according to Freddie Mac. This is also impacting mortgage applications, credit lines and refinance activity – loan originations were down approximately 30% in October 2023 from the previous year.  The good news is that mortgage delinquencies are low compared to other loan types.  Inflation is waning, but still remains above the Federal Reserve’s target of 2%. Consumer spending will decelerate due to slower economic and weaker employment growth which will cause rates to come down in 2024. Continuing homebuyer demand will keep home prices elevating 2.6% in 2024, but with rates dipping as low as 6%, housing will be a little more affordable.

The Federal Reserve’s aggressive handling of inflation by raising overnight borrowing rates to banks has had a positive effect, and further rate hikes appear unlikely as the numbers get closer to the Fed’s target of 2% inflation.

Meanwhile, help is out there for those being squeezed out of the market. FHA-guaranteed loans require as little as 3.5% down. Numerous state and local governments have increased programs for first-time and lower-income homebuyers. Many lenders offer grants, down payment assistance programs, and mortgages with no closing costs. The National Association of REALTORS® offers the Housing Opportunity Program, with resources for homebuyers.

While many potential homebuyers have been knocked out of the market by higher mortgage interest rates and home prices, there’s hope on the horizon that they’ll have better luck in 2024.