Why are rates dropping? I heard they were going up!

From Phil Winfrey, Plaza Mortgage Consultant

 
Why are we seeing lower rates when we've been told to watch for increases?  After the government ended their mortgage purchases it was thought that we'd see higher rates quickly.  The reason they haven't gone up has something to do with "Naked Short Selling".  First it was Germany and now other European nations have decided to ban this practice of "seeking to profit from an expected fall in the price of an asset by selling shares you don't own without borrowing or making arrangements to borrow".
 
Because of this ban, traders and investors feel that these measures are to avoid an even sharper decline in the global stock markets.  When markets are uncertain or worried, money seeks a safe haven and that has been the U.S. Bond market.  That drives mortgage rates down. 
 
Home buyers continue to have a reason to buy now and that's a real gift for all. Who knows how long it will last.  Long term rates are in the 4's and 5/1 ARM's are in the mid 3's!  With mortgage applications down 27% last week to a 13 year low we need the gift of low rates to continue!  Let your buyers know that going naked in Europe has been banned and they need to buy a house!  They'll know what you mean. 
 
Let me know if you'd like to see what this looks like in an estimate or if a financing flyer would be helpful for your open house.   Thank you for your support! 

Investors, Now Is The Time!

So you have recouped some of your losses in the stock market, things are beginning to look up, but is there somewhere else you should put your cash? Perhaps getting into the rental market isn't a bad choice! Investing in Real Estate can be a great cash cow for retirement.

While prices of homes have dropped significantly since the high, rental rates have not seen near the decrease of the last few years. There are many homes available which are basically ready for tenants and at a great price. This is a great opportunity because not only will you be collecting monthly rent, but also likely gaining as the property regains its value over the next few years.

Another option, if you are looking to purchase a home for yourself. There are a lot of incentives available to homeowners, well why not extend those incentives by purchasing a duplex, triplex or quadruplex which as long as you live in one of the units may qualify you for some or all of these incentives (tax breaks, better loan rates, etc).

Don't want to deal with tenants, repairs, etc, but still want to benefit from owning rental property? I manage properties for clients who want the income stream of a rental home, but don't want to deal with the 12am calls for a furnace repair.

There are lots of option out there, and great opportunities. We can also finance many of the purchases at very competitive rates. In unstable markets, cash flow is king, and that's exactly what rental properties provide!

Should I Rent Or Buy?

One of the most common questions we face on a daily basis is customers asking if they should rent or buy. On the surface it may seem cut and dry to many, but it's really quite a complicated question-and one that should be explored.

The first question you should ask yourself. How long do I plan on living in my home? If your answer to this is 3 years or more, likely buying will be better for you. If you answered less than 3 years, are you willing to rent the home after you move out? If so, buying may still be a better idea.

When analyzing the rent vs. buy decision a big factor that is often overlooked is the massive tax incentive in place to encourage buying. Let's say you purchase a home which has a payment of $1000/month. This is broken out into principal, interest, taxes and insurance. In most cases, insurance and taxes will amount to about $200 of this payment, leaving 800 to principal and interest. All of the interest you pay is tax deductible! In the early years of a mortgage the vast majority of your payment is interest (probably something like $750 in our example is interest!). So...you pay 1000/month, and of that $750 is deductible. But wait...remember that you paid $100/month in taxes..that's likely deductible too! So of your $1000 you get to deduct $850 from your taxes.

Now let's take the rental side. You are going to rent a place for $1000/month. How much of this is deductible? $0. That's right, zippo!

So assuming you're in the 25% tax bracket, in one year, you'll end up get about 2.5 months of payments FREE! (Via the tax deduction) If you buy vs. rent. This amount will adjust year after year as the amount of principal vs. interest you pay changes, but you'll still be saving money. Not to mention that you own the property, so you get to participate in any increase in value...not true with renting.

This is an ultra simplified version of this, and you should always consult your tax professional before making any decisions as your case may be different, but...the fact is often you'll save money on your taxes.

Not to mention when you own...no one can tell you not to hang a picture on the wall, or plant in your garden, what colors to paint, etc....Think about it....