The Little-Known Mortgage That Could Save You Big

 

Everybody’s heard of the 30-year home mortgage, and probably the 15-year mortgage, too. But did you know that there is a 10-year, fixed-rate mortgage? And for some, it can offer big advantages.

Those advantages include lower interest rates and enormous savings in the amount of total interest paid over the life of the mortgage, says Jim Duffy, a mortgage banker with Cole Taylor Mortgage in Atlanta, Georgia. But, he adds that because you are paying the principal of the mortgage down in a third of the amount of time you would a 30-year mortgage, the monthly payment will be higher.

“Still, they have become more popular. I’ve done more 10-year mortgages in the last year than I’ve done in 10 years prior,” says Duffy.

Here are four reasons why that trend may catch on.

#1 – The Interest Rate on a 10-Year Loan is Much Lower (Compared to a 30-Year Loan)

If you’re like most people, you refinance your mortgage for one main reason: to save money. So understandably, people usually focus on how their new interest rate will affect their monthly payment, says Duffy.

But focusing on the monthly payment alone can be detrimental to your wallet. For example, even though the monthly payment on a 30-year mortgage will typically be much lower than with a shorter-term loan, the interest rate will be higher. So, you’ll end up paying a lot more over the life of the loan in interest on a 30-year mortgage than you will on a 10-year. This is crucial to understand as the total interest, plus the purchase price of your home, is the true cost of your home, says Duffy.

So how much can you save in interest with a 10-year mortgage vs. a 30-year loan? Let’s look at the average interest rates from August 13, 2013 according to PNC Bank. We’ll compare a 30-year loan at an interest rate of 4.375 percent, with a 10-year loan at an interest rate of 3.125 percent, for a loan amount of $300,000.

 

  30-year mortgage 10-year mortgage
Loan Amount $300,000 $300,000
Interest Rate 4.375 percent 3.125 percent
Monthly Payment $1,497.86 $2,914.16
Total Interest Paid $239,228.08 $49,699.74

The numbers speak for themselves. If you can afford the higher monthly payment, you’ll save almost a whopping $190,000 over the life of their loan!

[Click to compare mortgage interest rates from multiple lenders now.]

#2 – Refinancing to a 10-Year Loan Won’t Reset the Clock

Traditional wisdom says that if you’ve got fewer than 20 or 15 years left on your 30-year mortgage, refinancing probably should be avoided. That’s because refinancing to another 30-year mortgage resets the clock on your mortgage.

But refinancing to a 10-year mortgage with a low interest rate could turn that logic on its head, says Duffy. That’s because most people who only have 15 or so years left on their mortgage probably have an interest rate much higher than today’s historically low rates, he says. Why? Interest rates were a lot higher 15 years ago, and homeowners who haven’t refinanced at all could still be stuck with these high rates.

For example, the interest rate for a 30-year, fixed-rate mortgage in January of 1995 was 9.15 percent, according to the Federal Reserve Board. 

Duffy says he recently helped a couple who only had 12 years left on their mortgage refinance to a 10-year mortgage.

“[T]hey [initially] had an interest rate of over 7 percent. They refinanced to a 10-year mortgage at a little over 3 percent,” which saved them tens of thousands of dollars, he says. “So it was a terrific move.”

#3 – You Can Build Equity Faster with a 10-Year Loan

Do you want to move in the next few years, but can’t sell your home because it’s worth less than the amount you owe on your mortgage? Refinancing to a 10-year, fixed-rate mortgage through a program like HARP, a government program that helps homeowners refinance their underwater homes, is one move that has helped more than a few people in that same situation, says Duffy.

How can this help? By refinancing to a 10-year mortgage, you can build equity faster, and own enough of your home so that it’s not underwater anymore when it comes time to sell.

“I’ve done several 10-year loans for people who want to move in three years and the best way they can see to do it is to budget every month and pay that principal down quickly, so they do a 10-year fixed,” says Duffy.

He says that the added benefit is that you can often get a lower interest rate when you refinance, and save a lot of money on interest as a result. Secondly, he adds, you could of course make extra payments without refinancing, but many know they won’t have the discipline to put that money aside.

#4 – A 10-Year Loan Allows for a Stress-Free Retirement

The 10-year mortgage may be the right move if you’re nearing retirement.

Here’s why: For a lot of people, their monthly mortgage payment is their biggest expense. Of course, when you’re working, that may not be a big deal. But what about when you retire and you start seeing a lot less income?

That payment could become quite a burden, making your sunset years not so sunny. Worse, it could force you to sell your home, or put off retirement. Duffy says that these are two major reasons he’s done many 10-year refinances.

“[Homeowners are] approaching retirement, it’s on the horizon, and they reason that it’s better to bite the bullet and pay more in a monthly payment while they’re working and producing income than still have a payment when they’re retired. It’s all about getting debt-free by the time they reach retirement so they can really enjoy it,” says Duffy. 

 

By: Terrance Loose of Yahoo Homes


Tech Tip Tuesday: September 17, 2013

How to use Instagram and Vine to make your listings shine

 

Instagram and vindOne of the most exciting things of using social media for real estate agents is the ability for you to give your clients a great way to tour the property they’re interested from the comfort of their home or office. It’s a great way for them to share the property they’re interested in with family and friends to help them make a decision.

So, with that in mind, you’ll want to make sure that you have your properties well-represented on every social media app from across the spectrum.

Two of the more exciting apps that have been released recently isInstagram and Vine. Each of these apps contain powerful tools for you to help show off your property in the best light possible. With these apps, it’s possible for you to make a sale without even having to leave the office!

If you don’t know about it, Vine is an incredibly popular video sharing site that’s spread like wildfire over the last year. Users are able to upload six seconds of video from their smartphone or tablet. It’s a great low bandwidth way to capture those types of moments that need a little more than just a photo impression. A few months ago, the app was released for Android so it’s only going to grow in popularity from here. Real estate companies have learned just how valuable this app is in demonstrating wide views while giving a short description of the property’s feature.

Imagine, instead of a static photo of someone swimming in the pool, you can demonstrate someone doing laps. That’s important since it helps your clients imagine themselves replacing the person in the pool. The short time you have to record video forces you to think of different ways to highlight your property. Anyone can do two minute tours – but believe it or not, even that is too long for the short attention span audience of the Internet.

instagram-video-addition-vine-poll__oPt

Everyone remembers the billion dollar acquisition of Instagram by Facebook last year, and recently, the results of that merger have begun to trickle into everyone’s Facebook feed. Last week, an important feature was added, and Instagram users can now post fifteen seconds worth of video. They’ve also included thirteen different filters that users can select from to make their video standout from their competitors. It’s the perfect way for you to showcase your different properties with a quick and easy video shoot that covers all angles of the property.

With Instagram, you have a built in base of subscribers who have already signed up and have been an active part of the service since 2011. There are many people who have the technical and social knowhow in what to post on there. You’re also allowed up to fifteen seconds of video ­- double what Vine offers (however, it wouldn’t be surprising if Vine changed the length of time you have to record as an option within the next few months as response).

Facebook has begun to promote Instagram stories within your feed already. Users who have connected their Facebook accounts to their Instagram accounts are sharing the photos that they like on Instagram. These ‘likes’ now appear in your feed with the intent to prime other people to check out the photos posted and see for themselves.

Vine however has the distinction and advantage of being first with the short video sharing apps, so it is still the one to beat. They’ve found a natural audience of filmmakers and storytellers who want to put their things online in a place that’s easy to share with friends and prospective clients. The most popular videos are those of pets and comedians doing funny bits. However, other real estate agents are finding out just how useful and powerfulVine can be for their business.

Each of these apps offer advantages for your business. It wouldn’t be out of line for you to maintain accounts on either one (in fact, you should already have signed up for an Instagram account to show your real estate photos with), but it is useful since you will want to maintain it with daily updates. Consider that when signing up that you’ll want to keep it maintained and your feed interesting enough so that people continue to check it out on a daily or weekly basis.

Remember, there’s no substitute for actually taking your client to tour the property and show them what it’s like in person, so make sure you are not substituting personal interaction when using tools like Instagram and Vine. Let these apps enhance your client’s experience with the listing they’re interested in, don’t let it replace the most important part, actual interaction with your clients! 

 

By: Powerup Social Media


Tech Tip Tuesday: September 10, 2013

Tech Tip

Today we want to share with you an easy little trick that often causes some not-so-easy anxiety.

How to post a PDF flyer to social media when working off your phone

So you’ve just received an email with a PDF attachment, and you want to share it on your social media channels, but how?

Easy…

1. Open the attachment.

2. Take a screenshot- doing so will save the screenshot in your photo stream. If you are unsure of how to take a screenshot on your device, click here for an iPhone tutorial or here for an Andorid tutorial.

3. Go to your photos, and select the screenshot image you just took.

4. Click “edit”, and crop the image. You want to crop the image, so that when posted to your social media channels it won’t look sloppy (i.e. like a screenshot).

5. Save the freshly cropped image.

6. Open a social media app (i.e Facebook, LinkedIn, etc. etc.).

7. Click “share photo”, select the image, and then add a fun and informative “caption”.

8. Click “post”, and you’re done.

CONGRATS! You just shared a professional looking post all from your phone! 


Americans Still Expect To Become Homeowners

  Homeownership

A big question facing the real estate industry over the last few years is how the housing crisis would impact the public’s belief in homeownership as a major component of the American Dream. Many felt the tragedy experienced by so many families would force them to reconsider their desire to ever be a homeowner again.

A recent study by the Joint Center for Housing Studies at Harvard University addressed this question. Their paper, Reexamining the Social Benefits of Homeownership after the Housing Crisis, revealed some interesting findings:

Homeownership Still Preferred Over Renting

“Even after the dramatic loss of equity and the high foreclosure rates, the early evidence suggests that people seem to believe that, over the long run, owning is still preferable to renting…The long term cultural preference for owning seems to have weathered the recent housing crisis.”

Americans Still Expect to be Homeowners

 

“The research on home-buying expectations supports the conclusion that very large percentages of Americans still expect to buy a home at some time in the future.”

Younger Americans More Desirous of Homeownership

“Moreover, the finding that younger renters and owners are more likely than their older counterparts to expect to own bodes well for the future of the housing market.”

Even after one of the most difficult decades in this country’s real estate history, the belief that homeownership is a part of the American Dream still lives on.

By: The crew at KCM