In July, the average 30-year fixed-rate mortgage fell below 3% for the first time in history.1 And while many Americans have rushed to take advantage of this unprecedented opportunity, others question the hype. Are today’s rates truly a bargain?

While average mortgage rates have drifted between 4% and 5% in recent years, they haven’t always been so low. Freddie Mac began tracking 30-year mortgage rates in 1971. At that time, the national average was 7.31%.2 As the rate of inflation started to rise in the mid-1970s, mortgage rates surged. It’s hard to imagine now, but the average U.S. mortgage rate reached a high of 18.63% in 1981.3

Fortunately for home buyers, inflation normalized by October 1982, which sent mortgage rates on a downward trajectory that would bring them as low as 3.31% in 2012.3 Since 2012, 30-year fixed rates have risen modestly, with the daily average climbing as high as 4.94% in 2018.4

So what’s causing today’s rates to sink to unprecedented lows? Economic uncertainty.

Mortgage rates generally follow bond yields, because the majority of U.S. mortgages are packaged together and sold as bonds. As the coronavirus pandemic continues to dampen the economy and inject volatility into the stock market, a growing number of investors are shifting their money into low-risk bonds. Increased demand has driven bond yields—and mortgage rates—down.5

However, according to National Association of Realtors Chief Economist Lawrence Yun, “the number one driver of low mortgage rates is the accommodating Federal Reserve stance to keep interest rates low and to buy up mortgage-backed securities.” According to Yun, “we will see mortgage rates stay near this level for the next 18 months because of the significance of the Fed’s stance.”6

HOW DO LOW MORTGAGE RATES BENEFIT CURRENT HOMEOWNERS?

Low mortgage rates increase buyer demand, which is good news for sellers. But what if you don’t have any plans to sell your home? Can current homeowners benefit from falling mortgage rates? Yes, they can!

A growing number of homeowners are capitalizing on today’s rock-bottom rates by refinancing their existing mortgages. In fact, refinance applications have surged over the past few months—and for a good reason.7 Reduced interest rates can save homeowners a bundle on both monthly payments and total payments over the lifetime of a mortgage.

The chart below illustrates the potential savings when you decrease your mortgage rate by just one percentage point. When it comes to refinancing, the bigger the spread, the greater the savings.

Estimated Monthly Payment On a 30-Year Fixed-Rate Mortgage

Be sure to factor in any prepayment penalties on your current mortgage and closing costs for your new mortgage. For a refinance, expect to pay between 2% to 5% of your loan amount.8 You can divide your closing costs by your monthly savings to find out how long it will take to recoup your investment, or use an online refinance calculator. For a more precise calculation of your potential savings, we’d be happy to connect you with a mortgage professional in our network who can help you decide if refinancing is a good option for you.

HOW DO LOW MORTGAGE RATES BENEFIT HOME BUYERS?

We’ve already shown how low rates can save you money on your mortgage payments. But they can also give a boost to your budget by increasing your purchasing power. For example, imagine you have a budget of $1,500 to put toward your monthly mortgage payment. If you take out a 30-year mortgage at 5.0%, you can afford a loan of $279,000.

Now let’s assume the mortgage rate falls to 4.0%. At that rate, you can afford to borrow $314,000 while still keeping the same $1,500 monthly payment. That’s a budget increase of $35,000!

If the rate falls even further to 3.0%, you can afford to borrow $355,000 and still pay the same $1,500 each month. That’s $76,000 over your original budget! All because the interest rate fell by two percentage points. If you’ve been priced out of the market before, today’s low rates may put you in a better position to afford your dream home. 

On the other hand, rising mortgages rates will erode your purchasing power. Wait to buy, and you may have to settle for a smaller home in a less-desirable neighborhood. So if you’re planning to move, don’t miss out on the phenomenal discount you can get with today’s historically-low rates.

HOW LOW COULD MORTGAGE RATES GO?

No one can say with certainty how low mortgage rates will fall or when they will rise again. A lot will depend on the trajectory of the pandemic and subsequent economic impact. 

Forecasters at Freddie Mac and the Mortgage Bankers Association predict 30-year mortgage rates will average 3.2% and 3.5% respectively in 2021.9, 10 However, economists at Fannie Mae expect them to dip even lower to an average of 2.8% next year.11

Still, many experts agree that those who wait to take advantage of these unprecedented rates could miss out on the deal of a lifetime. “With rates now at all-time historic lows, it’s hard to imagine that people may be holding out for something even better,” warns Paul Buege, president and COO of Inlanta Mortgage.12 Positive news about a vaccine or a faster-than-expected economic recovery could send rates back up to pre-pandemic levels.

HOW CAN I SECURE THE BEST AVAILABLE MORTGAGE RATE?

While the average 30-year mortgage rate is hovering around 3%, you can do a quick search online and find advertised rates that are even lower. But these ultra-low mortgages are typically reserved for only prime borrowers. So what steps can you take to secure the lowest possible rate?

1. Consider a 15-Year Mortgage Term

Lock in an even lower rate by opting for a 15-year mortgage. If you can afford the higher monthly payment, a shorter mortgage term can save you a bundle in interest, and you’ll pay off your home in half the time.13

2. Give Your Credit Score a Boost

The economic downturn has made lenders more cautious. These days, you’ll probably need a credit score of at least 740 to secure their lowest rates.14 While there’s no fast fix for bad credit, you can take steps to help your score before you apply for a loan15: 

• Dispute inaccuracies on your credit report.
• Pay your bills on time, and catch up on any missed payments.
• Hold off on applying for new credit.
• Pay off debt, and keep balances low on your credit cards.
• Don’t close unused credit cards (unless they’re charging you an annual fee).

3. Make a Large Down Payment

The more equity you have in a home, the less likely you are to default on your mortgage. That’s why lenders offer better rates to borrowers who make a sizable down payment. Plus, if you put down at least 20%, you can avoid paying for private mortgage insurance.

4. Pay for Points

Discount points are fees paid to the mortgage company in exchange for a lower interest rate. At a cost of 1% of the loan amount, they aren’t cheap. But the investment can pay off over the long-term in interest savings.

5. Shop Around

Rates, terms, and fees can vary widely amongst mortgage providers, so be sure to do your homework. Contact several lenders to find out which one is willing to offer you the best overall deal. But be sure to complete the process within 45 days—or else the credit inquiries by various mortgage companies could have a negative impact on your credit score.16

READY TO TAKE ADVANTAGE OF THE LOWEST MORTGAGE RATES IN HISTORY?

Mortgage rates have never been this low. Don’t miss out on your chance to lock in a great rate on a new home or refinance your existing mortgage. Either way, we can help. We’d be happy to connect you with the most trusted mortgage professionals in our network. And if you’re ready to start shopping for a new home, we’d love to assist you with your search—all at no cost to you! Contact us today to schedule a free consultation.

The above references an opinion and is for informational purposes only. It is not intended to be financial advice. Consult a financial professional for advice regarding your individual needs.

Sources:

1. CNN Business –
   https://www.cnn.com/2020/07/16/success/30-year-mortgage-rates-record-low/index.html

2. Freddie Mac –
   http://www.freddiemac.com/pmms/pmms30.html) 

3. Value Penguin –
   https://www.valuepenguin.com/mortgages/historical-mortgage-rates

4. Federal Reserve Bank of St. Louis –
   https://fred.stlouisfed.org/graph/?g=NUh

5. Bankrate –
   https://www.bankrate.com/mortgages/how-interest-rates-are-set/

6. Washington Post –
   https://www.washingtonpost.com/business/2020/06/25/mortgage-rate-remains-historic-low/

7. Yahoo! Finance –
   https://finance.yahoo.com/news/mortgage-refinancing-makes-big-comeback-151500346.html

8. Bankrate –
   https://www.bankrate.com/mortgages/is-no-closing-cost-for-you/

9. Freddie Mac June 2020 Quarterly Forecast –
   http://www.freddiemac.com/fmac-resources/research/pdf/202006-Forecast.pdf

10. Mortgage Bankers Association Mortgage Market Forecast July 15, 2020 –
    https://www.mba.org/news-research-and-resources/research-and-economics/forecasts-and-commentary

11. Fannie Mae July 2020 Housing Forecast –
    https://www.fanniemae.com/resources/file/research/emma/pdf/Housing_Forecast_071420.pdf

12. Washington Post –
    https://www.washingtonpost.com/business/2020/06/25/mortgage-rate-remains-historic-low/

13. Investopedia –
    https://www.investopedia.com/articles/personal-finance/042015/comparison-30year-vs-15year-mortgage.asp

14. Money –
    https://money.com/mortgage-rates-below-three-percent/ 

15. Experian –
    https://www.experian.com/blogs/ask-experian/credit-education/improving-credit/improve-credit-score/

16. Equifax –
    https://www.equifax.com/personal/education/credit/report/understanding-hard-inquiries-on-your-credit-report/

Eric Slifkin has authored this post, a Broker Associate at Keller Williams Real Estate and the Slifkin Real Estate Team founder. Eric and his experienced agents serve South Florida and the Treasure Coast, including  Stuart, Hobe Sound, Palm City, Port Saint Lucie, Jupiter, Tequesta, and the Palm Beaches.

Investing in Single-Family Rental Homes

By Lynn Ettinger

Thanks to TV, investors often think home flips are the main way to make money off of single-family homes, but a hold-and-rent-out purchase could be the better option.

WASHINGTON – When real estate professionals think about a rental property, they often picture large or maybe 10-unit apartment buildings – but they should envision single-family homes, said Bill Lublin, CEO of Century 21 Advantage Gold and president of Lublin Corp Property Management in Southampton, Pa.

Single-family rentals have increased by 31% in the past 10 years and make up 42% of the housing stock, Lublin noted during his session about buying, selling, and managing single-family rentals at the National Association of Realtors®’ (NAR) convention last year.

“We’ve been in an HGTV world, where people buy, fix and flip properties in an hour – without any real surprises – and making a bunch of money,” Lublin said. “When investors buy a home to flip, they have the cost of buying, repairing and selling it. When they buy a single-family rental, they only have to worry about acquisition costs. They’ll amortize those over time and get some deductions. They don’t have to worry about selling costs right away or short-term capital gains.”

Single-family rentals are a good way for entry-level investors to begin, Lublin added. They’re generally less expensive than duplexes, and families that rent them typically stay longer, reducing turnover costs – and investors usually don’t have to do as much renovation to make a rental attractive as they would for a “fix-and-flip.”

In addition, rentals offer four financial benefits: income, depreciation, equity, and appreciation. Income wins over profits, Lublin said. “With profit, you get it, spend it and move on. Profit is fleeting, but income is forever.”

Lublin cited a case in Philadelphia: a rowhouse he sold to an investor for $85,000 about four years ago. While the house was dated, it was in decent shape.

“The new investor did minimal renovation and rented the property immediately,” he said. “Now, because we’ve seen some significant appreciation recently, that home is worth probably $150,000 – an increase that isn’t taxable because they’ve not sold it and realized the gain. And they’ve received income during that time.”

Despite the benefits of investing in single-family rentals, selling to investors is a skill, according to Lublin. Initially, “you need to figure out what investors’ goals are. Later, you have to review with them whether they’re meeting goals. And in doing that, you’re looking at the ROI (return on investment).

“A really simple rule – whether you’re selling or buying – is the 1% rule,” Lublin said. “If the rent is 1% of the sale price, it’s a good return.” Lublin said this method doesn’t account for taxes but is a “quick and dirty way to determine whether a property is a good investment for your client or yourself.”

You don’t have to swing for the fence every time you make an investment, Lublin said. If you try to get a base hit – something that’s a good deal – you can generate income over the long haul.

Source: National Association of Realtors® (NAR)

© 2021 Florida Realtors

This post has been authored by Eric Slifkin, a Broker Associate at Keller Williams Real Estate and the founder of the Slifkin Real Estate Team. Eric and his team of experienced agents serve South Florida and the Treasure Coast, including  Stuart, Hobe Sound, Palm City, Port Saint Lucie, Jupiter, Tequesta, and the Palm Beaches.

Converting Your Home Equity Into Cash

Reverse Mortgage Basics

If you are an older homeowner it might be time to think about getting a reverse mortgage. This can be a smart financial decision if you’re looking to convert your home equity into money. Often a better decision than a home equity loan, the money gathered from a reverse mortgage can be used to cover home repairs, everyday living expenses, and medical bills.

But what exactly is a reverse mortgage? A reverse mortgage is just as it sounds. Instead of making monthly payments to a lender, the lender makes payments to the homeowner.

According to the National Reverse Mortgage Lenders Association, the money given by the lender is tax-free and does not affect Social Security or Medicare benefits, although it may affect the homeowners’ eligibility for certain kinds of government assistance, including Medicaid.

With a reverse mortgage, the homeowner continues to own their home until they pass away or wish to sell. This means that repaying a reverse mortgage is not necessary until the property is sold or the owner moves. Should the owner die before the property is sold, the estate repays the loan, plus any interest that has accrued. There is an allotted time for the estate to repay the loan, usually around six months.

Eligibility

To be eligible the homeowner must be at least 62 and own their own home. No income or medical requirements are necessary to qualify, and they may be eligible even if they still owe money on a first or second mortgage. Many seniors get reverse mortgages to pay off their original loan.

Reverse Mortgage vs. a Home Equity Loan

Often homeowners get confused between a home equity loan and a reverse mortgage. A home equity loan, also known as a second mortgage or a home equity line of credit, has strict requirements that include income and creditworthiness. A reverse mortgage has no income or credit score requirements. And, with a home equity loan, the homeowner continues to make monthly payments, unlike with a reverse mortgage. However, it’s important to note that while with a reverse mortgage the homeowner receives monthly payments, they are still responsible for real estate taxes, insurance, and home maintenance.

Request a Free Consultation

We are here for you whenever you need us and are dedicated to helping you every step of the way. Feel free to get in touch with any questions about getting a reverse mortgage.

Estate Home Living with a Backyard Country Club

Cobblestone is a gated and patrolled community in Palm City, Florida. Residents may obtain optional golf memberships to the private Fox Club, which surrounds the neighborhood. This subdivision offers a wide variety of custom and estate homes situated on oversize half-acre lots offering preserve, lake, and golf, views.

Home Staging 101

Have you ever watched HGTV and wondered how every home always looks put together? The answer to this is staging. Home staging goes beyond just cleaning and decorating your home. Staging is the process of adding decor, arranging furniture, and prepping your home to look perfect for listing photos, listing appointments, and open houses. With home staging, potential buyers see precisely where furniture should go and how each room lays out. Without staging, prospective buyers are only focusing on the visible issues the home may have.

Not only can staging make your home look like an HGTV dream or like it belongs on Pottery Barn's homepage, but it can speed up the sale of your property.

Virtual Staging

When it comes to marketing, staging makes your home more attractive to buyers. Home staging can be an expensive undertaking, but virtual staging services help buyers see what your vacant property might look like online, complete with furnishings and decor. Virtual staging helps get buyers interested and in the door without the (considerable) expense of physically staging your property.

Virtual Staging Gets Buyers Interested and in the Door

Virtual staging allows you to rearrange furniture, add decor, and still make your home look attractive to buyers, but everything is online — and cheaper. Because virtual staging is done on the web or with staging software, you don’t have to spend funds on new furniture, decor, or spend time rearranging everything. This method saves you time and money while still getting the same results as traditional staging. The only required cost is digital software, and most services charge a flat fee per room staged.

What do real estate agents do?

The answer: It depends. All agents are different. Our focus is on virtual staging, which is cost-effective and puts your house where buyers begin their search- online. Other agents may offer physical staging services or refer you to a trusted professional or company, and some will offer advice, while others don’t provide any resources for staging. If an experienced real estate agent has your success in mind, they will give honest feedback when it comes to home staging options.

If you’re selling your home soon, staging is something you need to consider. Depending on the current state of your home, some of these options may be better suited for you. Ask a trusted friend for their thoughts on which path you should take. And remember, we’re here to help too.

Schedule a call to learn more about how we help home sellers on the Treasure Coast or click on the image below to learn what your home could sell for in today's market.

Eric Slifkin, a Broker Associate, is the founder of the Slifkin Team at Keller Williams Realty. Eric and his team of experienced agents serve South Florida and the Treasure Coast, including  Stuart, Port Saint Lucie, and the Palm Beaches.

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Home Buying: Get a Final Walkthrough Before Closing!

When it comes to buying a home on the Treasure Coast, be sure a "final walk through" is performed prior to closing. A final walkthrough can head-off potential conflicts before closing and allows us to address common issues such as:

• If the current owner is on schedule to move out
• That the property is in the same condition it was when shown
• That any repairs required have been completed

In a best-case scenario, a final walkthrough is also a good time to have the sellers explain details about the house that the buyer may need to know, especially tricky pool heaters, access to attics, funny light switches, and sprinkler timers. It is also a great time to put together a list of companies and professionals who have serviced the house in the past.

One best practice is to schedule final walkthroughs at least 4 - 7 days before closing, as this is often enough time to resolve any outstanding issues before paperwork must be signed. (The final walk-through itself may happen within 24 hours of closing.)

Here are some things to look for at the final walkthrough:

• Check the electrical system. Wiring problems should be addressed before closing.
• Verify that the security system, doorbells, and garage doors are working.
• Run the AC and heater- make sure they work.
• Look for wet spots. Leaks may cause wood rot, mildew, mold, termites, or even foundation issues.
• Flush toilets, run the dishwasher, washer, and dryer.
• Test ceiling and exhaust fans.
• Check that the bathrooms have no water damage, standing water, or mold.
• Test the toilets and turn on all faucets to ensure they have hot water and don't leak.
• Confirm all agreed to repairs were completed according to the terms of the contract. Repairs may be done by the seller or licensed professional, so make sure that they have been made as stipulated.

I’m dedicated to protecting my clients from the beginning through the end of the home buying experience. If you want to work with someone who pays attention to the details, give me a call today at 772-288-0765.

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The Truth Behind Renting vs Buying in Today's Market

Are you doing the math these days around renting versus buying a home? Trying to decide if you can afford to buy? If so, there are a number of key factors to consider in making your decision.

Things to Consider When Comparing Renting vs. Buying a Home

1. A mortgage is a surefire way to build wealth. Your mortgage is like a mandatory savings account. A portion of your payment each month is going straight into your equity in your home. With renting, it’s your landlord who is building equity, not you.

2. The tax situation may have profound implications. Typically your mortgage interest and property taxes are deductible on your income taxes. Note: early on in a traditional mortgage you pay the most in interest and your deduction is the highest.

3. Renting puts your wallet at the mercy of the market more often than buying. If you have a year-long lease in an apartment, your rent could go up significantly should the rental market heat up. Your rent isn’t likely to stay the same over a long period of time. In most cities, in fact, it will steadily go up. With a standard mortgage, however, your payments are fixed and predictable. It might seem like a lot at first, but if you buy within your means, it’ll seem like less and less of an expense as the years go on.

4. A mortgage gives you more future financial flexibility. The longer you have a mortgage, the more equity you build. The more equity you build, the more options you have to borrow against that equity or use it in ways which may be advantageous for debt and tax purposes. With renting, no such long-term benefit exists.

Ready to Buy?

The key to home ownership is accepting the fact that you must buy a home you can afford which is priced in accordance with the market. Even if you’re not ready today, having a conversation with a Realtor® will help you decide if now is the time to buy or prepare for tomorrow.

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When it comes to your home's value don't rely on a computer guestimate! Our detailed home value estimate reports are not generic guesstimates using inaccurate data pulled from Trulia or Zillow records*.

Free report for homeowners in Stuart, Florida and the Treasure Coast. Get House Price Report

*Get a detailed Comparative Market Analysis sent to your inbox when you download our instant home value estimate (valid email required).

This post has been authored by Eric Slifkin, a Broker Associate at Keller Williams Real Estate and the founder of the Slifkin Real Estate Team. Eric and his team of experienced agents serve South Florida and the Treasure Coast, including  Stuart, Hobe Sound, Palm City, Port Saint Lucie, Jupiter, Tequesta, and the Palm Beaches.

Whether we realize it or not, the colors with which we surround ourselves—in our clothes, cars, and homes—reveal a lot about us. We also can convey our personality through our paint choices, and some experts believe that one paint choice specifically—that of our front door—can say a lot about us. So what does your front door color choice say about you?

Red. Regarded as a powerful “punch” color, red is the color of passion. By painting the front door red, the homeowner is saying that the home within is a vibrant place, full of life, energy, and excitement.

Brown. Whether painted or stained, a brown front door looks natural and organic, but it can send mixed messages in terms of color psychology. On the one hand, brown conveys warmth, stability, and reliability. However, certain darker shades of brown signal a desire for privacy, even isolation.

Very likely, the color you’ve chosen for your front door projects the way you want your home to be viewed. But if you inherited the color from the previous owner, or if you want to say something different about yourself and your home, you can quickly change the color, says Zimmer. “It takes only a few hours to prep and re-paint a standard-size front door, and by applying a durable, top-quality paint, you can make a totally different color statement that will last for years.”

Thinking About Resale?

A fresh coat of paint on the front door can enhance your home's curb appeal but If you’re thinking about resale, you’ll want to be tactical about your color choice. You may even decide to take it a step further by painting the entire exterior, which indicates to potential buyers that your home is well-maintained. Other easy projects that improve your home's salability may include additional landscaping, upgraded lighting, faucet replacement, or even adding a firepit. More Home Selling Tips

Eric Slifkin, a Broker Associate, is the founder of the Slifkin Team at Keller Williams Realty. Eric and his team of experienced agents serve South Florida and the Treasure Coast, including greater Stuart, Port Saint Lucie, and the Palm Beaches.